Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

GREAT YARMOUTH OUTER HARBOUR BILL

As amended, considered; to be read the Third time.

HARWICH PARKESTON QUAY BILL (By Order)

Order read for resuming adjourned debate on Question [28 April], That the Bill be now read a Second time.

Debate to be resumed Thursday 1 May.

ULLAPOOL HARBOUR ORDER CONFIRMATION BILL

Considered; to be read the Third time.

Oral Answers to Questions — SOCIAL SERVICES

Social Workers (Attacks)

Ms. Harman: asked the Secretary of State for Social Services what evidence he has about the incidence of attacks of violence against social workers by their clients.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): My right hon. Friend the Secretary of State expresses his regret that he is unable to be with us this afternoon, as he is overseas on official business.
Detailed information about violent attacks against social workers is not collected centrally on a systematic basis, but the evidence that we have had, distressing though it certainly is, is sadly not inconsistent with the nature of a social worker's job, which inevitably brings him or her into contact with emotionally disturbed or mentally disordered clients. It must be for employing authorities to assess the level of risk to their staff and to take the necessary action.

Ms. Harman: Is the Minister aware of the nationwide research which has been carried out at Cambridge university which shows that social workers are likely to be attacked by their clients on average once a year? In view of the recent deaths of two social workers at the hands of their clients, why are the Government taking such a complacent attitude about the matter? Will the Minister co-ordinate the actions of local authorities, which are trying to reduce the risk to their social workers and encourage and enable them to do something constructive? Will he ensure that people coming out of institutions into the community get proper back-up support so that they do not become a danger to themselves or to the social workers who care for them?

Mr. Whitney: The Government are in no sense complacent about this very difficult issue, and we remain in close contact with the employing authorities. We will, of course, maintain such contact to discover whether further guidance can properly be given centrally. We are also in close contact with the parents of those involved in the specific case in which the hon. Lady has taken a close interest.

Mr. Dickens: Is it not true that there are recruited into the social services many odd-bods who are long-haired, unshaven and who wear political badges on their lapels, who provoke attacks upon themselves by their very attitude?

Mr. Whitney: I am not prepard to generalise about odd-bods in the social services. I believe that social workers have a very difficult job to do, and these cases raise difficult and sensitive issues.

Mr. Wigley: The House will be somewhat surprised that the Minister was not stronger in his condemnation of the question from the hon. Member for Littleborough and Saddleworth (Mr. Dickens).
Does the Minister accept that the risks to social workers would be considerably lessened if there was proper assessment of the needs of people leaving long-stay hospitals with mental illness or other forms of mental disorders? Does he agree that, to enable that to happen, it would be greatly advantageous if the Disabled Persons (Services, Consultation and Representation) Bill, now in another place, could have its commencement orders on these sections as soon as possible?

Mr. Whitney: Many of the issues involve clinical decisions, which, of course, the Government carefully monitor, but which are not directly in our control. The House will be well aware of the Government's helpful attitude to the Disabled Persons (Services, Consultation and Representation) Bill, to which the hon. Gentleman referred.

One-Parent Benefit

Mr. Knox: asked the Secretary of State for Social Services what is the percentage take-up of one-parent benefit.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major): The percentage take-up has steadily improved over recent years, and the latest available estimate shows that about 75 per cent. of those who stand to gain by claiming one-parent benefit are receiving it.

Mr. Knox: I accept that there has been a great improvement during the last few years, but does my hon. Friend not think that the figure is still disappointing? Does he have any plans to try to improve the percentage take-up?

Mr. Major: I share my hon. Friend's wish that the take-up should be improved. We shall continue with the brief television fillers, which have proved to be particularly successful in encouraging people to claim this benefit, as well as with the traditional advertisements, which appear in child benefit books and on leaflets and posters in a variety of places, notably surgeries, health centres, post offices, law centres and elsewhere. I hope that in this fashion we will increase the take-up.

Mr. John Mark Taylor: Would my hon. Friend care to speculate upon how many people do not take up the one-parent benefit, although they are entitled to it, and upon what the cost would be if they did?

Mr. Major: I do not have the most recently available figures, but, broadly, about 100,000 families who could have claimed one-parent benefit did not take it up. According to the latest figures, the cost would have been about £18 million a year. I hope that in about three months' time we will be able to update those figures.

Invalid Care Allowance (Married Women)

Ms. Richardson: asked the Secretary of State for Social Services whether he will seek to extend invalid care allowance to married women; and if he will make a statement.

The Minister for Social Security (Mr. Tony Newton): This matter is currently the subject of legal proceedings before the European Court, to which the Government are giving close attention.

Ms. Richardson: Will the Minister accept that if the women, under 100,000, who do not qualify for the invalid care allowance because they are married were not there to provide informal care, the Government would have to fork out between £5 billion and £7 billion in order to provide formal residential care, and that the £85 million that it would cost to extend the benefit to married and co-habiting women is chickenfeed because of the worth of the care that these women provide? Will he recognise that women all over the country are boiling over with anger and frustration because of this anachronistic Government, who should pay up or go?

Mr. Newton: Our most up-to-date estimate is that the cost would be £100 million rather than £85 million. I acknowledge entirely the immense value of the work of these carers and of many others who do not qualify for the invalid care allowance, whatever the law on the invalid care allowance may be. The issue, among others, alongside the legal issue, is about the best way to help such carers in the devoted work that they do.

Mr. Ashley: Why must the Government be dragged, kicking and screaming, into making this payment? Did the Minister read the article in The Sunday Times about the woman who was overwhelmed with caring for her husband who was suffering from multiple sclerosis, and whose family was devastated? Does he appreciate that without the invalid care allowance these women suffer even more because they are confined to their home and lack all help? If the Government do not help them, they lack all hope as well.

Mr. Newton: I have met a number of women, and others, who have been providing this kind of care, and I very much appreciate what they do. However, I repeat to the right hon. Gentleman that it is not automatically clear that a payment of £23 a week, which is what we are talking about, as distinct from the wider availability of respite care or other support services, is the best way to help such women.

Mrs. Virginia Bottomley: Many people will be pleased to hear the Minister's remarks about those who are caring at home for relatives, but is he aware that many

Conservative Members very much hope that he will be able to see his way to extending the invalid care allowance to married women?

Mr. Newton: I am very well aware that feelings on this matter extend to both sides of the House.

Mrs. Clwyd: Why does the Minister think that this country is brought before the European Court more often than any of the other countries in the European Community? Is he not thoroughly ashamed of that fact?

Mr. Newton: Quite possibly—I say this in, I hope, a reasonable spirit—that is because of the number of grotesquely discriminatory pieces of legislation that we inherited from the previous Labour Government.

Mentally Ill and Mentally Handicapped People

Mr. Chapman: asked the Secretary of State for Social Services if he is satisfied with co-ordination between health authorities and local authorities in the proper provision of community care for the mentally ill and mentally handicapped with particular reference to financial provision.

Mr. Whitney: Good progress is being made in many areas in the joint planning of community care, but there is room for improvement over the country as a whole. The joint finance and care in the community arrangements enable health authorities to give financial support for community care provided by local social services authorities and voluntary organisations.

Mr. Chapman: I am grateful to my hon. Friend for his reply. Is he aware of the confusion and contradiction, at least in my borough, between the local health authority and the social services department of the council as to their exact responsibilities over the provision of care for the mentally ill and the mentally handicapped? That has been tragically underlined in the case of a constituent who is severely mentally handicapped, who within 48 hours lost both her parents who were looking after her at home. In view of that confusion and contradiction, will my hon. Friend look into both the particular case and the general responsibilities so that it is possible unambiguously and unequivocally to assert where the responsibility lies?

Mr. Whitney: This is undoubtedly a difficult matter. As I said in my earlier reply, the good progress is not universal. There may be room for improvement. It may well be that my hon. Friend's constituency is a case in point. I am glad to tell my hon. Friend and the House that a multi-disciplinary meeting on that tragic case will be held on 13 May. I believe that that meeting will demonstrate the good co-operation that exists across the authorities in this tragic and worrying case.

Mr. Carter-Jones: Is the hon. Gentleman aware that, for historical reasons, severe distortions often take place with respect to moving people from long-stay hospitals into the community? Will the hon. Gentleman take into account the anomalous position for Salford health authority and Salford city council regarding his policy on Prestwich hospital?

Mr. Whitney: I shall look into the details. The local health authority and local authorities must work closely together against the background of support facilities, including joint finance, which the Government have provided and continue to provide.

Mr. Sims: Does my hon. Friend accept that, although the policy of moving mentally ill and handicapped people into the community is commendable, it is expensive and shifts the burden on to the social services department and the local authority? It is essential that adequate funds are provided so that the scheme will be successful.

Mr. Whitney: We accept that there are financial pressures. That is why we urge maximum co-operation, to go at the pace of the possible, depending on the local circumstances. That is why we have produced the funding that is now available.

Mr. Kennedy: Is the Minister aware that everybody, including the Government, accepts that successful community care cannot be a cheap option? How, therefore, can there be the co-ordination necessary to ensure the success of the policy when, for example, local authorities are starved of sufficient funds? They require those funds to provide the type of housing and the range of back-up facilities in the community that will enable people coming out of long-stay institutions not to be in a position where they lack sufficient community support or where they simply end up being re-admitted to the very institutions from which they moved. Will the hon. Gentleman consider other aspects of Government policy that operate against the interests of community care?

Mr. Whitney: Local authorities must choose their own priorities. No one would pretend that that was an easy task. Priorities must be set against a background of rising expenditure in the local authority area. The hon. Gentleman should take note of the financial facilities that are being made available. For example, this year, the joint finance allocation will be about £111 million.

Mr. Richard Page: Does my hon. Friend accept that there is considerable concern among parents, especially elderly parents, about their children, often young adults, who are returned to the community without adequate support or back-up? Will he clarify the guidelines between the appropriate authorities so that they cannot argue and bicker among themselves, and so that they will know exactly what their individual responsibilities are?

Mr. Whitney: There should be no question of individuals being returned to places outside the health authority scheme unless suitable and adequate arrangements have been made. That is precisely why the JCCs and the joint care planning teams are provided. They should ensure that the problems to which my hon. Friend referred are solved locally.

Mr. Meacher: Is the Under-Secretary of State aware that a recent survey of private rest homes for the disabled and the elderly found that degradation and exploitation were the norm, not the exception? Is the hon. Gentleman aware that residents were forced to strip in front of others to wash; milk was watered down to save money; incontinent residents were left without underwear; and YTS trainees were made to dispense drugs without knowledge of dosage side-effects? Is it not utterly repugnant that the Government should be encouraging huge commercial profits to be made in this way by private rest homes at the expense of frail and vulnerable patients?

Mr. Whitney: The Government are determined that the highest standards should be maintained in residential and nursing homes and similar accommodation, whether they are operated in the public or the private sector. That

is why we instituted the inspection systems. For example, to help local authorities, we have increased the scale of registration fees and introduced regulations under the "Home Life" publication. If the hon. Gentleman sought to suggest that badly maintained homes exist only in the private sector, I invite him to consult his hon. Friend the Member for Peckham (Ms. Harman) to instruct him on the dreadful conditions found in the Nye Bevan home in Southwark.

NHS Accommodation

Mr. Dubs: asked the Secretary of State for Social Services what representations he has received about his proposals on National Health Service accommodation.

Mr. Canavan: asked the Secretary of State for Social Services what recent representations he has received about accommodation for National Health Service employees; and if he will make a statement.

The Minister for Health (Mr. Barney Hayhoe): Since the new national policy was announced last July, about 200 letters have been received. In some cases concern has been expressed that staff might be evicted as a result of this policy. But, as my right hon. Friend made clear in his written answer on 25 April, no one will be required to move from his or her present accommodation without being offered a suitable alternative place to live.

Mr. Dubs: Is the right hon. Gentleman aware that, despite the parliamentary answer to which he referred, there is still widespread concern among NHS staff—nurses, ancillary workers and others—that they will be pressurised to leave their homes? Will the right hon. Gentleman give an assurance that no one who works for the NHS will be forcibly evicted or removed from his home?

Mr. Hayhoe: As I made it clear, no one will be required as part of this policy to move from his present accommodation without being offered a suitable alternative place in which to live. I am glad that this question gives me a further opportunity to clarify the position and, I hope, to put straight the record, which some people are deliberately seeking to misrepresent.

Mr. Canavan: As many Health Service employees in Scotland live in genuine fear of eviction, will the right hon. Gentleman extend his absolute guarantee to Health Service employees north of the border who live in such accommodation? As much of the NHS living accommodation is in an appalling state of disrepair, because Crown immunity exempts health authorities from the obligation to carry out the necessary repairs, will the right hon. Gentleman abolish Crown immunity in that respect, too, so that Health Service employees have the same rights as other tenants?

Mr. Hayhoe: One objective of the present policy of disposing of vacant and surplus property is to produce the resources which can be ploughed back to modernise and bring existing property up to a decent standard.

Mr. McCrindle: Because of the emotive way in which the matter is being dealt with by the Royal College of Nursing of the United Kingdom and, evidently, the Opposition, will my right hon. Friend take this opportunity to restore a sense of perspective by reminding us of the


number of employees who live in property owned by the health authorities and the percentage of total employees who do so?

Mr. Hayhoe: This residential accommodation is designed particularly for certain professional trainees—junior doctors, student nurses, and other staff—especially in inner city areas. A little more than half the junior doctors, a little under half the student nurses, and fewer than one in 10 qualified nurses live in such accommodation.

Mr. Norris: Does my right hon. Friend agree that the real outrage would occur if the Government neglected the massive amount of property owned by the NHS which deserves to be developed for the better care of patients rather than distributed haphazardly, as at present?

Mr. Hayhoe: My hon. Friend is right. If we extend the matter way beyond the residential accommodation that we are discussing, it is clear that substantial resources are locked up in those properties, which could be disposed of and the resources used for the benefit of patients in general.

Mr. Evans: Where will the NHS get the suitable accommodation from?

Mr. Hayhoe: That will depend upon local circumstances.

Mr. Robert Atkins: What representations has my right hon. Friend received about NHS accommodation for young arthritically disabled children at the Wrightington hospital in Lancashire, bearing in mind the importance to local people of this regional centre of excellence, which the North-West area health authority proposes to close?

Mr. Hayhoe: May I write to my hon. Friend on this matter? Clearly the individuals whom he he has in mind are not NHS employees.

Mr. Kirkwood: The Minister said that no one would be evicted unless suitable alternative accommodation was offered. Is he aware that there are areas where there is no such suitable alternative accommodation? What happens if the offer is turned down? Who defines what is suitable?

Mr. Hayhoe: That must be a matter for local judgment, but it is wholly reasonable that, as part of this policy, one should seek to make more effective use of the NHS estate. If someone is seeking unreasonably to prevent that from happening and suitable alternative accommodation is made available, he is being treated fairly.

Mr. Rogers: Does the Minister accept that often, especially in rural areas where there are psychiatric hospitals well away from any conurbation, there is great difficulty in finding suitable alternative accommodation? In urban areas, where suitable accommodation may be available, because of the low salaries paid to those involved in the Health Service they cannot afford it.

Mr. Hayhoe: More than 90 per cent. of qualified nurses do not live in such accommodation, and, as I said, the stress points are in the inner-city areas.

Mr. Meacher: Is the Minister aware that up to 50,000 nurses and auxiliaries could be forced to leave their NHS homes within the next two years? Is he also aware that, contrary to the impression he has given, some health authorities have already jumped the gun and started to

evict staff, even though they are supposed to have at least a year to make alternative arrangements? How can a third-year learner nurse on £4,500 a year find another home in London, where flats are at least £50 a week, which is almost her entire take-home pay?

Mr. Hayhoe: The hon. Gentleman has his figures wrong. I made them clear, but the sort of figures he gave are wholly inaccurate. The intention is that provision should be made for all student nurses, but just under half the student nurses occupy such accommodation.

Prescription Charges

Mr. Roy Hughes: asked the Secretary of State for Social Services if he will make it his policy to charge patients only the actual price of a prescription when the cost of the prescriptions is below the current prescription charge.

Mr. Hayhoe: I have no present plans to change the arrangements for prescription charges.

Mr. Hughes: Does the Minister recall that in April 1979 the prescription charge was 20p and that today, updated with inflation, it should be 40p? However, Government policy means that it is now £2·20 per item? How does he reconcile that with the Prime Minister's statement that the National Health Service is safe in her hands? Even this Government should not charge people more than a prescription is worth.

Mr. Hayhoe: The crucial aspect of the matter, which the hon. Gentleman has not acknowledged, is that about 75 per cent. of prescriptions are dispensed entirely free of charge and that even 5 or 6 per cent. are dispensed under the season ticket arrangements. That leaves only about one in five prescriptions for which the full charge is payable.

Sir Kenneth Lewis: Would it nevertheless be advisable to tell people who pay for their prescriptions that they can obtain them cheaper by going straight to the chemist? Would it not be better if they did not continually return to their doctors for prescriptions? It would save doctors' time and Health Service money.

Mr. Hayhoe: When an item can be bought more cheaply without a prescription, that arrangement can be followed by the individual and the chemist concerned.

Netley Castle Convalescent Home

Mr. Stephen Ross: asked the Secretary of State for Social Services if he will take steps to ensure that the Netley Castle convalescent home near Southampton remains open for National Health Service patients.

Mr. Whitney: Management of this hospital is the responsibility of the Southampton and South-West Hampshire health authority, which yesterday considered its future use. I understand the authority decided that this hospital should remain open.

Mr. Ross: I have had to turn again to the Minister for support, as I have been campaigning for three or four months to ensure that the hospital remains open. However, I am delighted at the news announced after last night's meeting. Is he aware that my constituents, some of whom are cancer sufferers, have very much relied on that home for the past 10 or 15 years? I pay tribute to the care and attention given by the staff at the home, which is very


highly regarded in my part of the world. May I tell the Minister that I am grateful that that decision has been reached.

Mr. Whitney: I am somewhat overwhelmed, but I welcome and agree with the hon. Gentleman's points.

Sir David Price: Is my hon. Friend aware that that quite admirable home is in my constituency and that I have looked after it for the past 31 years? [Interruption.] Is my hon. Friend further aware that virtually all of the home's patients come not from the Southampton/south-west Hampshire area but from the Isle of Wight and the Channel Islands? We are delighted about that, but the funding arrangements vis à vis areas that send patients to that home are for from adequate. Given the squeeze on Southampton and south-west Hampshire, the pressure is on to obtain a better contribution from the districts that use the home.

Mr. Whitney: I am very happy to endorse the remarks of my hon. Friend who, over the past 31 years, has made a powerful contribution to his constituency. This year, the allocation to the Wessex area regional health authority, which involves that whole district, has been increased by 7·7 per cent. I very much hope that the authorities concerned will be able to fulfil my hon. Friend's wishes.

General Disability Premium

Mrs. Ann Clwyd: asked the Secretary of State for Social Services how many representations he has received in support of the Government's proposals for a general disability premium.

Mr. Newton: Responses are not generally in a form that can sensibly be used to provide a simple breakdown of views. But the proposed simpler structure, with the associated aim of improved regular weekly income support for less well-off sick and disabled people as a whole, is welcome. However, there are reservations about some aspects and we are giving continued consideration to how they may be overcome.

Mrs. Clwyd: Does the Minister agree that several thousand of our most severely disabled people will suffer a cut of about 60 per cent. in their standard of living because of the proposals in the Social Security Bill? All the disability organisations have expressed concern. How does the hon. Gentleman square that with the Government's claim to be targeting those in greatest need of help?

Mr. Newton: I very much doubt the figures that the hon. Lady has given, although I know that they have been put forward. According to our latest information, about 2,500 claimants were receiving quite significant domestic assistance payments, but only to an average of £3·60, which does not correspond with the hon. Lady's information. I recognise the anxiety that exists, but we are trying to overcome it.

Mr. Alfred Morris: Will the Minister accept that the Government's proposals could inflict gratuitous extra hardship on some of the most severely disabled people in this country, and could force them into the sort of subhuman existence that Granada's "World in Action" documentary so strikingly exposed last night? Is he prepared to consider an as-of-right community care addition to meet the additional requirements of disabled people? Would it not be self-defeating as well as inhumane not to do so?

Mr. Newton: The right hon. Gentleman knows very well that that sort of community care consideration is very much in our minds in relation to the social fund. I am reasonably confident that we can find a way of meeting the right hon. Gentleman's objectives and mine.

Family Credit Scheme

Mr. Evans: asked the Secretary of State for Social Services how many representations he has received in support of the Government's proposals for a family credit scheme.

Mr. Major: Many organisations and individuals responded to the proposals in the Green Paper "Reform of Social Security". The responses were not generally in a form permitting a simple breakdown of numbers for or against specific proposals, but many supported the main objectives of family credit, including the need to improve help for low-income families with children and the need to improve work incentives.

Mr. Evans: Will the Minister confirm that every women's organisation and every employer and trade union organisation representing women has protested in the strongest possible terms about this disgraceful proposal? Why do Tory Governments persist in treating women with contempt?

Mr. Major: I cannot precisely confirm the hon. Gentleman's first observation. To say that we are treating women with contempt is a curious comment to make about a benefit that doubles the number of beneficiaries and ensures that every beneficiary gets more money than before. That is the sort of contempt most people would welcome.

Mr. Squire: Given that the trigger mechanism for activating family credit is identical to the trigger mechanism for family income supplement, but that it is no longer paid to the caring parent, is my hon. Friend satisfied that it will lead to a reduction in family poverty?

Mr. Major: I understand the meaning behind my hon. Friend's remarks. I must point out to him that most two-parent working families rely on one wage and accept responsibility for deciding how to use it. There is no reason why that principle should not apply when family credit is part of the income.

Dr. Godman: What rate of take-up is anticipated for this benefit?

Mr. Major: The take-up for family income supplement is about 50 per cent. We anticipate that family credit will have a 60 per cent. take-up. That, of course, is a matter of speculative judgment and one cannot be sure, but we are relatively confident that it will have a substantially higher take-up than family income supplement.

Mr. Meadowcroft: Does the Minister accept that Governments of various colours have recognised that this benefit ought to be paid to the woman? What made the Government decide to move away from that crucial principle?

Mr. Major: The hon. Gentleman misunderstands the nature of the benefit. It forms a substantial element of help to low-income families. On that basis, it is entirely logical to illustrate its links with employment by payment in the fashion that we propose. We think that it will prove to be a popular benefit.

Mr. McCrindle: I endorse the sentiment underlying the idea of family credit. Has my hon. Friend received any representations from small employers expressing anxiety about the additional workload that will be placed upon them?

Mr. Major: There is considerable misunderstanding about the amount of work that will fall to employers. We intend that the Department of Health and Social Security will make the calculations for family credit and the recalculations when a new period of benefit is due. We shall shortly issue a consultation paper for employers to comment upon and we shall enter into discussions with them about the way in which the benefit will work.

Mrs. Beckett: Does the Minister acknowledge that a more truthful answer to my hon. Friend the Member for St. Helens, North (Mr. Evans) would have been "one"? Does he also acknowledge that about like 100,000 families who will lose their entitlement to free school meals are not likely to welcome this benefit, especially as their compensation, when offset against housing benefit, is likely to be about 44p a week?

Mr. Major: In reply to the first part of the hon. Lady's question, I have nothing to add to what I said in reply to her hon. Friend. The hon. Lady mentioned school meals. She should bear in mind that the element of family credit that is applicable to school meals is £2·20 a week. Moreover, that is paid for 52 weeks of the year, whereas free school meals apply generally, but not inevitably, merely for 30 weeks of the year.

Mrs. Virginia Bottomley: Does my hon. Friend agree that giving more financial assistance to parents with older children by means of family credit is an important step towards helping those greatly in need?

Mr. Major: I entirely agree with that observation.

Students (Benefits)

Mr. Andrew F. Bennett: asked the Secretary of State for Social Services if he has yet received the report of the Social Security Advisory Committee concerning the eligibility of students to claim benefits; and if he will make a statement.

Mr. Newton: We received the committee's report at the end of last month and are giving it careful consideration.

Mr. Bennett: Will the Minister publish the report as soon as possible? Does he agree that more and more students have been drawn into the social security net because of the inadequate level of student grants? Rather than taking from students the right to claim benefit, would it not be far more logical to put up student grants, so that students do not need to claim benefit? Does he not think that it would be grossly unfair if, as a result of these changes, students were forced down to the level of the social security safety net?

Mr. Newton: We shall publish the Social Security Advisory Committee's report at the normal time, that is, when we are publishing the Secretary of State's response to it. The hon. Gentleman will be aware that part of the proposition put to the SSAC was for an increase in the grant, countervailing some parts of the social security proposal.

Mr. Latham: Will my hon. Friend confirm that he is approaching the report, whatever it says, with an open mind, and not with a preconceived policy objective?

Mr. Newton: That may be implicit in the fact that we received the report towards the end of last month and are giving it careful consideration.

Ill Health and Poverty

Mr. Tony Lloyd: asked the Secretary of State for Social Services what assessment he has made of possible links between ill health and poverty.

Mr. Whitney: It has been widely accepted for many years that there are differences in health experience between socio-economic groups. However, the causes of these differences have proved extremely difficult to establish and are certainly complex. Research in the area continues to be supported by the Medical Research Council, the Economic and the Social Research Council and by universities.

Mr. Lloyd: I do not know much about the Minister's constituency, but I know about my own, where some of the poorest people in Britain live. I know that the chances of my constituents' children surviving birth is lower than the national average, that they will have worse health than the national average, and that they will die earlier. What will the Minister do about that?

Mr. Whitney: I do, indeed, know about my constituency, and I know something about the hon. Gentleman's constituency. Never has so much money been spent on health care in real terms as it now is in the Manchester area.

Mr. Thurnham: Does my hon. Friend agree that the findings of both the Black report and the Holland report, linking poverty and ill health, show that there should be no delay in the provision of urgently needed new hospital facilities in Bolton?

Mr. Whitney: We are continuing to provide new hospital facilities in the north-west region, which has one of the highest capital spending programmes of all the regional health authorities. Therefore, our concern is manifested by the real resources being devoted to new hospitals.

Mr. Dobson: If the Minister acknowledges—he can scarcely do otherwise—that there are differences in health and life expectations between social classes, why are the Government not doing anything to implement the recommendations of the Black report, which clearly sets out proposals intended to reduce those differences?

Mr. Whitney: The differences to which the hon. Gentleman refers have existed for many years and long before the Black report, which did not explain the causes. The proposals which have been implemented by the Government, for example the significant increase in expenditure on national health provision, and the expenditure on inner cities, the urban programme and such initiatives, clearly demonstrate effectively the Government's practical concern.

Mr. Bill Walker: Does my hon. Friend agree that while there must always be a connection between a lack of facilities, wherever they are, and health problems, there are also genuine problems which are created by overindulgence in many different ways as a result of affluence?

Mr. Whitney: I am happy to agree with my hon. Friend. A great deal of good health depends on healthy living styles, which we seek to promote directly through the Government and through the activities of the Government-funded Health Education Council. I agree with my hon. Friend that the level of income is by no means the deciding factor.

Ambulance Service (Quota Systems)

Mr. Pike: asked the Secretary of State for Social Services what guidance he gives to health authorities on the use of quota systems in ambulance services.

Mr. Whitney: Our guidance on the provision of ambulance transport is based on criteria related to medical need. I understand that the Preston health authority has introduced a quota system for non-emergency services, but that there is no question of not meeting all cases of emergency medical need.

Mr. Pike: Will the Minister examine more closely the quota system which has been introduced for the whole of Lancashire? Will he stress to that authority that patients' needs are more important than cutting and saving cash? Will he make sufficient funds available to provide an adequate ambulance service for the people of Lancashire?

Mr. Whitney: I shall reconsider the point that the hon. Gentleman makes. During the five years to 1984–85 the Government have increased ambulance provision nationally in real terms by 9·2 per cent.

Disabled Persons (Services, Consultation and Representation) Bill

Mr. Dormand: asked the Secretary of State for Social Services whether he has yet made an assessment of the resource implications of the Disabled Persons (Services, Consultation and Representation) Bill; and if he will make a statement.

Mr. Newton: The local authority associations were consulted on the likely cost of the Bill, if amended on the lines of the Government consultation paper issued in February. They estimated that cost as being in excess of £100 million in a full year. The associations and others are now being further consulted on the cost implications of the Bill in the form in which it received its Third Reading.

Mr. Dormand: Is the Minister aware that his answer confirms the suspicions felt by me and by many of my hon. Friends that the Government do not intend to honour their commitments on this measure, which received massive support when it was introduced by my hon. Friend the Member for Monklands, West (Mr. Clarke)?. Are not the Government being a bit hypocritical in giving it an ostensibly warm welcome some two weeks ago, and in now saying that they cannot provide the resources for it?

Mr. Newton: There is no basis whatever for the hon. Gentleman's allegation. The Government, in completely good faith, have made it clear throughout that there were resource implications and that those implications would have to be considered in determining the date of the commencement orders.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr Gerald Bowden: asked the Prime Minister if she will list her official engagements for Tuesday 29 April.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.

Mr. Bowden: In view of the widespread alarm about the reports of leaks from a nuclear installation in the Soviet Union, will my right hon. Friend take this opportunity to reassure the House and the nation that our own security checks and monitoring system will prevent such an occurrence in the United Kingdom?

The Prime Minister: My hon. Friend is aware that we have very high standards of safety, design, construction. operation and maintenance of nuclear plants in the United Kingdom. There is a question tabled on this subject which will be answered later today. I would just like to reassure my hon. Friend that preliminary measurements have failed to detect any increase in the level of radioactivity in this country.

Mr. Benn: Because this is a serious accident at a Soviet nuclear power station, and because the Americans themselves have refused to build a pressurised water reactor in the United States for nine years due to anxieties about their safety, will the Prime Minister give the House an absolute assurance that there will be no decision about building a PWR at Sizewell until the full report on the American accident—[Interruption.]—has been given to the inspector and until there has been an opportunity for the House to take into account the very large number of issues raised, including leaks at Sellafield and the decision to sell British plutonium to America for its weapons programme?

The Prime Minister: The right hon. Gentleman is in a position to know the very high standard of safety which we exact in the construction of our nuclear plants and the very high standards of the Nuclear Installations Inspectorate. As I have already indicated, we are not in a position to make a full assessment, but there has been no increase in radioactivity in this country that we have been able to detect. We shall have to await the report on the inquiry into Sizewell before taking any action.

Mr. Maxwell-Hyslop: Has my right hon. Friend had time today to correct the impression given by Kate Adey's report on BBC television that the stick of bombs that fell on some flats in Libya were aimed at a target approved by my right hon. Friend, when, in fact, they came from an aircraft damaged by anti-aircraft fire? The BBC showed none of the targets approved by my right hon. Friend as being used by those taking part in terrorism against this country and successfully struck in that attack.

The Prime Minister: My hon. Friend makes his own point very effectively. As I have indicated in previous statements, the parameters which we set for permission to use those aircraft were strictly confined to targets which had demonstrably been involved in terrorist attacks elsewhere. I believe that what my hon. Friend says is correct.

Mr. Hattersley: Does the Prime Minister still hold the view that she expressed on BBC on Sunday—that there is never any possible justification for terrorism and violence?

The Prime Minister: I do not wish to put a gloss on what I said in that interview. It was a long interview and I believe that I explained my views fully.

Mr. Hattersley: Since, as part of that full expression of the Prime Minister's views, she said that violence and terrorism are never justified in any circumstances, will she now join us in condemning the violence and terrorism of the Contras in Nicaragua and in condemning President Reagan for providing military and financial aid to that terrorism?

The Prime Minister: I also referred to that in the interview and I neither wish to add to nor detract from what I said.

Mr. Hattersley: It was because I heard the Prime Minister refer to that that I wanted to express the nation's contempt for her double standards in that matter and give her a second opportunity of joining with the Opposition in condemning all terrorism—terrorism in Nicaragua and Libya. Why does she not do that now?

The Prime Minister: Because the right hon. Gentleman will also recall that I said what our policy on Nicaragua was. It was to support the Contadora process and get out all advisers from Nicaragua, including the many thousands of Cubans.

Mr. Andrew MacKay: asked the Prime Minister if she will list her official engagements for Tuesday 29 April.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. MacKay: Will my right hon. Friend find time today to confirm that she supports the view of the overwhelming majority of law-abiding people in Britain that the police are doing an excellent job, often in difficult circumstances, and not the view of Sharon Atkin, the prospective Labour candidate for Nottingham, East, who tells us that they are on the rampage and out of control?

The Prime Minister: I join my hon. Friend in believing that the police do an excellent job in Britain, completely impartially. I condemn those politicians who never hesitate to take a chance of criticising the police and the powers that enable them to carry out their task.

Mr. Dubs: When did the Prime Minister first learn of a plot to intimidate Mr. Gerry Gable of Searchlight magazine, and when was she told that a Conservative Member of Parliament was implicated in that allegation?

The Prime Minister: If the hon. Gentleman has any information of any kind he should give it to the police. Police matters, as he is well aware, are not for me.

Mr. Alex Fletcher: Was not the Soviet Union's failure to give the earliest possible warning to neighbouring countries about the dangers of nuclear fallout, and to say nothing about the lack of advice to their own citizens, a most callous and irresponsible act? Will my right hon. Friend take the earliest opportunity to condemn that action of the Soviet Union, both directly and through the offices of the EEC and the United Nations?

The Prime Minister: As I say, there will be an answer to a private notice question later, but I understand that the Swedish and Finnish Governments were informed of the accident only after radioactive clouds had reached their territory. It is, of course, a duty upon an authority that belongs to the International Atomic Energy Agency to report accidents to that agency.

Mr. Alton: What help and advice have been requested of the United Kingdom's Atomic Energy Authority in combating the fires that are now raging following the disaster in the Soviet Union yesterday? What transfrontier agreements exist between the Soviet Union and other countries for combating leaks of radioactive waste, and what agreements exist dealing with the disclosure of information after such leaks occur? Does the right hon. Lady not think that the disaster yesterday should cause us at least to reflect on the desirability of proceeding with the reprocessing of nuclear waste at Sellafield?

The Prime Minister: As I said, there is a reply to a private notice question, I believe, coming up later. We have not, as far as I am aware, received any requests for help, which is perhaps not surprising in all the circumstances. We are not in a position to make an assessment, and I have already indicated my views on the British nuclear industry, which has very high standards indeed.

Mr. Stern: asked the Prime Minister if she will list her official engagements for Tuesday 29 April.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Stern: Will my right hon. Friend confirm that the apparently small increase in the old-age pension this July is caused by the fact that it is an interim increase, with a further amount due next April? Does she further agree that this Government's record in caring for the old-age pensioner is second to none, not least by bringing down the rate of inflation to a level that would have been declared to be both impossible and unattainable by the Labour Government?

The Prime Minister: My hon. Friend is correct. The increase that takes place in July is an interim increase following the major increase last November, which was £2·50 for a single pensioner and £4 a week for a married couple. There will, of course, be a further increase next April. I also agree with my hon. Friend that it is a great advantage to pensioners and to their savings to get down the rate of inflation. I hope that that advantage will continue. It will, for as long as we have a Conservative Government.

Mr. Raynsford: Does the Prime Minister agree that had the increase in the pension continued to be based on the increase in inflation or earnings, whichever was the greater, as was the case under the Labour Government, the average pensioner would be several pounds a week better off now?

The Prime Minister: Yes, but a Labour Government would have been broke long before they could implement their policy. Whatever the hon. Gentleman says, the pension under a Conservative Government buys more than it did after the last increase of Labour.

Mr. Alexander: In view of the wide appreciation in the United States of my right hon. Friend's support for the


Libyan bombing, will she take the opportunity at this week's summit to ask President Reagan whether he will take further steps to curb the activities of Noraid, which promotes and subsidises terrorism in parts of the United Kingdom?

The Prime Minister: My hon. Friend is correct. Of course this subject will be discussed at the summit and in the margins of the summit. I should like to thank both the President and most—indeed, all—Members of the Administration for the strenuous efforts that they have made to condemn terrorism and violence in Northern Ireland and to stop any finances corning from the United States to feed that terrorism. I shall make the point again to the President, and hope that the Senate will pass the extradition treaty.

Mr. Meadowcroft: asked the Prime Minister if she will list official engagements for Tuesday 29 April.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Meadowcroft: Does the Prime Minister recognise that the concern expressed following the accident at the nuclear power station in the Soviet Union obviously expresses the concern that everybody feels about such accidents? Will the Prime Minister recognise that international action is required, and will she initiate action under principle 21 of the United Nations declaration on the human environment of 1972—[Interruption.]

The Prime Minister: I wish that I could have heard all the hon. Gentleman's question, but, as I indicated, there will be replies to supplementary questions on a private notice question afterwards. The record of our own nuclear industry is absolutely superb. If there are any accidents overseas of the kind that we have seen in the Soviet Union, they should be reported to the International Atomic Energy Agency, so that the lessons can be learnt universally.

Mr. Sayeed: Will my right hon. Friend take time today to consider how best to use her very considerable abilities

and standing in the world to persuade the USSR to abolish the use and production of chemical and biological weapons, so that the United States does not feel it necessary to develop binary weapons?

The Prime Minister: Yes. My right hon. Friend the Minister of State had something to say about this yesterday. The Soviet Union possesses over 300,000 tonnes of chemical warfare agents. Like the United States, we in Britain are committed to seeking a negotiated ban, and a successful outcome to the Geneva talks would obviate the need for the United States to pursue modernisation. The fact that the Soviet Union has continued to build up its stockpile, while no United States weapons have been produced since 1969, is conclusive proof that one-sided disarmament does not work.

Mr. Austin Mitchell: asked the Prime Minister if she will list her official engagements for Tuesday 29 April.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Mitchell: Will the Prime Minister take time to reflect on, and explain to the country, what she sees as the moral difference between killing and maiming innocents by exploding bombs underneath them, and killing and maiming innocents by throwing bombs on their heads?

The Prime Minister: If the hon. Gentleman is saying that one must never be prepared to use force against those who attack us with force, he is giving in to terrorism.

Mr. Rowe: On a point of order, Mr. Speaker, arising out of questions. As is so often the case, it took the Opposition Front Bench three attempts to make a point that a Back-Bencher would have had to make in one. Was it in order for the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) to have made his third attempt in a form that was not even a question?

Mr. Speaker: Order. The hon. Gentleman has been here long enough to know that a certain latitude is always given to the Front Benches.

Soviet Nuclear Accident

Dr. John Cunningham: (by private notice) asked the Secretary of State for the Environment if he will make a statement on the dangers to the British Isles of fallout from the accident at the Soviet nuclear plant at Chernobyl, near Kiev.

The Secretary of State for the Environment (Mr. Kenneth Baker): The whole House will want to join me in expressing sympathy to the people of the Soviet Union. We do not know with any certainty the precise nature of the incident, but it is clear that there may have been significant casualties.
A disturbing feature of this incident is the way in which knowledge of it has come not from the Soviet Government, but from monitoring in other countries. I would urge the Soviet Government to give a full account of what has happened and the steps that have been taken to bring the incident under control.
We for our part are monitoring, through the United Kingdom Atomic Energy Authority, the National Radiological Protection Board and the Ministry of Agriculture, Fisheries and Food, levels of radioactivity in the United Kingdom. Present evidence suggests that there is no danger to the United Kingdom, but the situation will continue to be monitored carefully.

Dr. Cunningham: I thank the Minister for that statement. Will Her Majesty's Government make strong and immediate representations to the Government of the Soviet Union on the need for the most full and urgent disclosure of all information about the nature and the scale of this accident? Can he confirm that a graphite moderated reactor in the station, comprising four light water reactors without, apparently, any secondary containment, has been on fire for several days?
Do Her Majesty's Government have any information about the nature of the radioactive emissions that are taking place? Will Her Majesty's Government respond positively to any requests from the Soviet Union for assistance? Can the Minister confirm that there are no nuclear stations of this type and design in the United Kingdom? Will any additional monitoring in the United Kingdom be required and what liaison is taking place with other European Governments on the nature of the contamination?
Will Her Majesty's Government join other European Governments to request international inspection of the site and the consequences of the accident? Does the Secretary of State know whether there are any British citizens in the vicinity of the plant? Finally—[HON. MEMBERS: "Hear, hear."] I am astonished that Conservative Members apparently do not regard this as a serious matter. Will the Secretary of State convey the sympathy of my right hon. Friend the Leader of the Opposition, my hon. Friends, myself and the House to the Government and people of the Soviet Union?

Mr. Baker: On the hon. Gentleman's last point, I am sure that the beginning of my statement will cover that. I speak on behalf of the whole house. There have been casualties and clearly we are concerned. On the matter of strong representations to the Soviet Government, my right hon. Friend the Secretary of State for Energy this morning

asked that full details of the accident and what is happening be made available. I cannot confirm details about a continuing fire at the moment.
We have not received any request for assistance through our embassy, but I can assure the House that if we receive a request for assistance of a scientific nature and we can be helpful assistance will be made available.
I can confirm that we have no power stations of the type involved in this incident in the United Kingdom. There has been extensive monitoring in the United Kingdom by the National Radiological Protection Board in Oxford and Glasgow with gamma monitors. There is no evidence of increased radioactivity at present. The Ministry of Agriculture, Fisheries and Food is checking deposit in the United Kingdom. It has collecting posts on the east coast and also on high rainfall areas in north Wales. Milk samples will continue to be taken this week.
All the Central Electricity Generating Board power stations have monitoring equipment and there is no indication of an increase in radioactivity. On the issue of international inspection, the Soviet Union is a member of the International Atomic Energy Agency, and, as such, I hope that it will make information about the accident available through that body—because that is part of the principle of it. It is valuable for the world nuclear industry to know as much about it as possible.
The hon. Gentleman asked about British citizens. At this stage we do not know whether any British citizens were affected, but the embassy in Moscow is making inquiries.

Mr. Patrick Jenkin: Is it not clear that many of the questions asked by the hon. Member for Copeland (Dr. Cunningham) would have been better addressed to the Soviet Government? Is there not a remarkable contrast between the reticence of the Soviet authorities about what is obviously an extremely serious accident and the openness of the system in western Governments, most recently exemplified by the statement of the new chairman of BNFL, Mr. Harding, which has been so warmly welcomed by environmental interests in this country?

Mr. Baker: Unfortunately, there is a striking contrast. We have to be concerned about public opinion and it is only right and proper that we should put our cards on the table and be open—as we are—on these matters. I have been speaking this morning and this afternoon to representatives of our large team of nuclear inspectors and confirming that in our nuclear policy safety is absolutely paramount. In fact, if nuclear energy is to be generated, as we believe that it should be, it must carry the conviction of the people. That can be done only by very rigorous safety standards.

Mr. David Alton: Is the Minister aware that the British Council has said that there are some 100 British students and several teachers in the Kiev region? What have the authorities in Moscow and Leningrad done to try to make contact with them to ascertain their safey? Will he also agree that it is somewhat wry for the Government to criticise the lack of information coming from the Soviet Union, regrettable though that is, when the Government have a very tight rein over the information made available from our own nuclear industry? Far too much secrecy shrouds our nuclear industry.

Mr. Baker: The hon. Gentleman does his cause no good by exaggerating. There is openness and frankness in this country in dealing with the nuclear industry. It is one of the most regulated industries we have, with a vast number of checks and balances on environmental grounds and safety in the plants. The embassy in Moscow is checking on the students. We know that there are some students in Minsk which is just 100 km to the north of the incident.

Mr. David Crouch: Will my right hon. Friend, in conjunction with his right hon. Friend the Secretary of State for Energy, stress to the Government of the Soviet Union the importance of the complete release of all the information concerning this tragedy so that we may share the information regarding such a disaster and learn from it?

Mr. Baker: Yes, I will certainly do that. The information will be of interest to us and to the Scandinavian countries which have been more directly affected. It is important that the information is available, as we all make strong representations to the Soviet Government.

Mr. Tony Benn: Before the right hon. Gentleman is too ready with his criticism of concealment of information, which I too regret, would he accept that a major nuclear explosion at Kyshtym in the Soviet Union in 1958 was monitored by the Central Intelligence Agency which notified the Atomic Energy Authority in Britain but told the British agency not to make the information public for fear that it might cause anxiety about the use of nuclear power? There are many other examples of such concealment.
Apart from the risks of a radioactive cloud reaching Britain, which I agree is unlikely, will the right hon. Gentleman undertake to ensure that, before any authority is given to proceed with the pressurised water reactor, there is a full report of the cause of the light water reactor accident at Chernobyl? Is it not time that the House had an opportunity for a debate on nuclear power as a growing number of people believe that the time has come to phase it out?

Mr. Baker: The right hon. Gentleman's last point is not a matter for me. However, with regard to his first point, the right hon. Gentleman would be on stronger ground if the Soviet Union had told the world about the accident when it occurred rather than our learning about it from the monitoring equipment in other countries. I strongly contest the right hon. Gentleman's view that there is anything less than frankness in our dealings with the nuclear industry in Britain. I dare say that, over the coming weekend, the protests about nuclear energy will be much stronger in the West than in the Soviet Union.

Mr. Michael McNair-Wilson: Does my right hon. Friend not agree that the disaster illustrates the international dimension to nuclear accidents? As a result, does he think that it is now time for some international monitoring, or better still, international safety standards for nuclear reactors?

Mr. Baker: My hon. Friend will know that we are a member of the International Atomic Energy Agency; that involves obligations of openness and a willingness to

allow inspection and examination of records and things of that kind. That is very important as it stresses the international nature of the nuclear industry.

Mr. Donald Stewart: Does the right hon. Gentleman agree that the catastrophe has demonstrated again that such accidents cannot be confined to national boundaries, like other less deadly forms of pollution? Will he intercede with his right hon. Friend the Secretary of State for Scotland to postpone the present inquiry into the Dounreay reprocessing plant until the countries which might be affected by any radioactivity from that plant have been consulted?

Mr. Baker: The right hon. Gentleman should appreciate, as I am sure he does, the very good safety record of the British nuclear energy industry. There has been no full-scale major incident in 25 years in the operation of several power stations. The highest standards of safety are used in the design and construction of British nuclear power plants.

Mr. Richard Alexander: Will my right hon. Friend consult his right Friend the Home Secretary to discover the best way to deal with the hordes of CND and Greenpeace protestors who are no doubt at this moment massing outside the Soviet embassy?

Mr. Baker: As I said in reply to the right hon. Member for Chesterfield (Mr. Benn), the protests are likely to be much greater in western capitals this weekend than in Moscow.

Mr. Frank Cook: I have taken note of the opinion expressed by the Secretary of State, that the nuclear industry in Britain has been open and frank about its operations; I am reassured by that. However, in view of the difficulty experienced in obtaining information about Sellafield in the past, will he assure us that the information that is made available by the Soviet Union will be freely available in Britain? Furthermore, will he ask his right hon. and learned Friend the Foreign Secretary to ensure that his Department makes representations on behalf of people like my constituent Mr. Robin Denham who is currently studying at the university of Kiev and who has been exposed to grave danger as a result of the accident? Will the Secretary of State arrange for the British authorities to make arrangements for the evacuation of British subjects, should it prove to be necessary?

Mr. Baker: On the hon. Gentleman's last point, I shall draw to the attention of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs the name of the hon. Gentleman's constituent. I assure him that the British embassy in Moscow is making urgent inquiries about the number of students in both Kiev and Minsk. The information that we get will be made publicly available.

Mr. Robert Banks: Does my right hon. Friend agree that there are many lessons to be learnt from this disaster, not least that it is immensely important for a nation to have the insurance of trained civilian personnel to deal with emergencies and to offer advice and protection from radiation to those who seek it?

Mr. Baker: I agree with my hon. Friend that there are elaborate emergency arrangements in all civil nuclear power plants which are tested fully; and the staff are


trained to deal with emergencies. I emphasise again that the design of the Russian reactor—a light-water-cooled graphite moderated reactor—is unique and that there are no other stations like it in the West. I understand from the Central Electricity Generating Board that British experts have evaluated this design and rejected it as unstable.

Mr. D. E. Thomas: Will the Secretary of State accept the deep concern and sympathy of those who have nuclear power stations in their constituencies for the community which has been affected by this disaster? Will he take new initiatives at the international level, through the International Atomic Energy Agency, to ensure that new safety standards worldwide are implemented? It is clear that radiological emission is no respecter of nations and state boundaries.

Mr. Baker: Yes, but that also implies that other countries have to conform to this country's standards. If there had been an accident of that kind in this country, there is no question but that we would have been open and frank about it straight away and that it would have been treated in that way. It is regrettable that that did not happen in this case.

Mr. David Madel: In view of the slow way in which the Russian Government let out this information, will Her Majesty's Government make a formal request to the Russian Government for international inspection of the disaster area?

Mr. Baker: My right hon. Friend the Secretary of State for Energy passed a message to the Soviet Government this morning asking for the fullest information. I am in no position to say whether or not the Soviet Government will respond to that message. Their response may be delayed, but I very much hope not. All sides of the House have made it clear that it is in everybody's interest that as much information as possible should be made available about this incident as soon as possible.

Mr. D. N. Campbell-Savours: If the present rules of the International Atomic Energy Agency do not provide for the earliest possible disclosure, will the Secretary of State set out to amend those rules, particularly as the Soviet Union is a participator in that agreement?

Mr. Baker: It is no good taking a unilateral position unless the other parties to the agreement are prepared also to be frank and open. The international agreement allows for international inspection of civil power stations. The CEGB was, and is, prepared to conform to that agreement, but I am afraid that that is not the case, as far as we know, in Russia.

Cornish Tin Industry

Mr. David Penhaligon: (by private notice) asked the Secretary of State for Trade and Industry if he will make a statement indicating the Government's intention regarding the future of the Cornish tin industry.

The Minister of State, Department of Trade and Industry (Mr. Peter Morrison): The Government have made it clear that they are willing to consider applications for assistance towards the cost of projects which will make the mines competitive in a free tin market. An application from Geevor tin mines is already being considered. An application from the RTZ group is expected shortly. Both will be assessed as rapidly as possible.

Mr. Penhaligon: I remind the Minister of the seriousness of the situation, as these mines are in an area where average male unemployment is in excess of 25 per cent. Already this saga has been going on for six months. Furthermore, I remind the Minister that he still has the £50 million that was offered to the tin dealers. Will the Minister accept that because of the current price for tin very few mines in the world are breaking even, let alone making a profit? If, therefore, Rio Tinto Zinc could be persuaded to give the mines and the £15 million that they would incur in closure costs to a management-employee buy-out and if the employees could be persuaded to take a pay cut in lieu of some form of long-term profit sharing, would the Government be prepared to make a significant contribution towards enabling a new company to be relaunched on the market so that advantage could be taken of the rise in the price of tin when it occurs?

Mr. Morrison: As the hon. Gentleman knows, I am aware of the serious position in Cornwall. With every respect to him, his question about management buy-outs by those involved in the RTZ mines was hypothetical. As I said in my original answer, we expect a proposition to be put forward by RTZ on the ground that it will make the mines viable at some future stage. Like all Governments, we need to have a test of viability foremost in our minds.

Mr. David Harris (St. Ives): Is my hon. Friend aware of the desperate situation facing Geevor mine—that, unless help is forthcoming this week, it is almost certain that the pumps will be switched off at the weekend and that the mine will be flooded, probably never to reopen? I make an earnest and urgent plea that, before this week is out, the Government will make assistance available to Geevor, at least to keep those pumps going while negotiations continue on the Geevor application.

Mr. Morrison: I assure my hon. Friend that it is important to expedite the Geevor application. Whether we can have care and maintenance in the meantime will depend upon that.

Mr. Dennis Skinner: Do not the Government have a cheek to talk about a test of viability regarding the thousands of people who have lost or will lose their jobs in the tin mines in Cornwall and the southwest when the Government never applied that test of viability to the Export Credits Guarantee Department, when it was £350 million in the red, but used taxpayers' money to bail it out? The Government found £252 million to bail out the Common Market, because it had run out of funds, and more than £100 million to bail out Johnson


Matthey Bank, because their friends were involved. The Government talk about a test of viability. Why do they not give people a chance to earn some money instead of throwing them on the scrap heap and paying out dole money which the taxpayers have to find?

Mr. Morrison: If I recall correctly, the hon. Gentleman supported a Government during the 1970s—

Mr. Skinner: Supported a what?

Mr. Morrison: —supported a Government during the 1974–79 period that used the test of viability to close down the Ebbw Vale steelworks in the constituency of the right hon. Member for Blaenau Gwent (Mr. Foot). They used the test of viability, as we must.

Mr. Robert Hicks: Is my hon. Friend aware of the rising sense of frustration and annoyance at the delay in resolving the tin question with specific reference to the Cornish tin-producing mines? Will he assure the House that the various suggestions and applications that have been made will be dealt with immediately by his Department in the context of our county, which is already in a hard-pressed economic position?

Mr. Morrison: The simple answer to my hon. Friend is yes. If my hon. Friend were to discuss the matter with the management of Geevor and of RTZ, he would be informed that my officials have dealt with the matter as expeditiously as possible in terms of the preparation of submissions, and so on. Therefore, the simple answer is yes.

Mr. Michael Foot: I advise the hon. Gentleman to check his facts a little more carefully before he again refers to Ebbw Vale. Regarding the specific question which he is supposed to be answering today—on the Cornish tin mines—will he look back and see what a Labour Government did to put money into those mines and to keep them going thereafter? Without that money, the closures might not have taken place in the late 1970s. Many miners in Cornwall know that that is the truth, even if some of their representatives in this place do not.

Mr. Morrison: I am delighted to be reminded by the right hon. Gentleman that I should check my facts more carefully on the steel works which I mentioned. I certainly am aware of what happened under the previous Administration.

Sir Peter Emery: I remind my hon. Friend that, as long ago as Easter, the Select Committee on Trade and Industry published an interim report urging the Government to be prepared for the possibility of the action that has now come about and to be ready to take interim measures to sustain the position until final decisions can be made. Will my hon. Friend express a greater assurance which we can pass on to management and workers in Cornwall and which will allow them to continue until a final decision has been made? Surely it would be fatal to have the matter closed now, because the Government might come forward with a favourable decision in four or five weeks.

Mr. Morrison: I am aware that the Select Committee on Trade and Industry spent a considerable time looking into the matter. Its report goes into detail in many ways about the whole tin problem. I am aware also that the

Select Committee recommended certain proposals that the Government should adopt. I hope that my hon. Friend agrees that it would not be sensible to reply to the Select Committee's proposals until we have had an application from RTZ—we shall reply as soon as we can—because that would be the wrong way to proceed. I listened carefully to my hon. Friend's other question.

Mr. Stan Crowther: Would it not be disgraceful if this small but important industry, which contributes many millions of pounds a year to the national economy, were allowed to die from lack of help from a Government who claim to be devoted to the free market philosophy but who have actively supported an international cartel which was set up to manipulate the market and whose activities the Select Committee found came pretty close to the borders of criminality? If Ministers are prepared, as they said they were, to put £50 million of taxpayers' money into trying to rescue the dealing end of the business, does it not make sense to accept the Select Committee's recommendation that the Government should invest at least that amount in the producing end of the business where the real wealth creation takes place?

Mr. Morrison: With respect, I do not think that the hon. Gentleman listened to my original answer. I said that my Department was looking carefully at applications to ascertain whether they passed the test of viability. That is precisely what we are doing and, I think, what the hon. Gentleman would want us to do. I can assure the hon. Gentleman that we could not be looking more closely at the applications.

Mr. Robin Maxwell-Hyslop: Is the problem for my hon. Friend as a Minister the fact that the test of viability depends upon predicting the world price of tin after the banks have finished unloading the tin warrants they hold as security and after the mines throughout the world have finished unloading the stock which they thought they had sold ahead but for which the contracts have gone bad? Will my hon. Friend follow the much more positive recommendations of the Select Committee on Trade and Industry, as expressed by my hon. Friend the Member for Honiton (Sir P. Emery), and support the development work in the mines which will reduce production costs, whatever the price in five years' time? None of us can possibly foresee that price. As this crisis will drive out many marginal producers in the world, is it not sensible to take a "risk"—no one can predict the price four or five years ahead—and support employment rather than suffer unemployment?

Mr. Morrison: I agree with my hon. Friend that one important element is the price of tin in three, four or five years. I agree also with his proposition that, if there is to be investment in any of the mines in Cornwall, it must be aimed at reducing production costs. The judgment to be taken is based more on the former than on the latter. We shall have to take those matters into account, as will the companies concerned.

Mr. Tam Dalyell: Judging from the example of Polkemmet in my constituency, once the pumps have been turned off in any mine, one might as well call it quits. May I ask a question of fact? How much tin will actually be anaesthetised by any decision to close down the mines and cut off the pumps? It may not be


possible to regain the tin at any time. Frankly, is this not another case of accountants in the City of London making decisions on matters for which they have little feeling?
Some of us support strongly the views of the Cornish tin miners. As one who has attended party meetings in Cornwall, I know how strongly they feel. Their factual questions have not been answered. What are the reserves of tin which will be anaesthetised? Does the Department know, or does it have no notion?

Mr. Morrison: Of course the Department knows. The amount of tin produced at the current price, which is just under £4,000 a tonne, is equal to the sum of £25 million a year. Of course the hon. Gentleman will appreciate that tin is an international commodity—

Mr. Dalyell: What are the reserves? The Minister is not answering the question.

Mr. Morrison: I have answered the question. One of the points which must be taken into account is that there is, to a great extent, over-production; that is why the price of tin has come down gradually.

Mr. Kevin McNamara: Will the Minister confirm that, in 1979, RTZ was offered money under the Labour Government scheme to develop the mine? The company turned down that offer because it was confident that it would prosper under the present Government. More important, is the Minister aware that over 1,000 members of my union and other unions are likely to be made unemployed as a result of this action? While the Minister is waiting for RTZ and the other companies to state the schemes to make the mines viable, what are the Government prepared to offer the firms to maintain jobs? That is what Cornish people want to know, and that is what my union want to know. What are the Government prepared to offer the companies to keep people in jobs?

Mr. Morrison: The hon. Gentleman asks a hypothetical question. The answer depends entirely on what applications are made. The hon. Gentleman is aware that, under regional grant and regional assistance, aid is not cash-limited so the answer is as long as a piece of string.

Mr. Ian Wrigglesworth: If these mines are closed there will be dire consequences for Cornwall, the industry and the country. In view of that,

will the Minister explain more fully to the House what he means by viability? When considering viability, will the Minister take into account the long-term position of these mines, and the enormous cost to the public purse as well as the companies involved of closing any pits?

Mr. Morrison: I hope that it goes without saying that the long term is what we must take into account. Obviously, at this stage, there is no question of the mines being anything but unviable. Any investment will be in terms of production costs and the price of tin in three, four, or five years' time.

Mr. Dalyell: What a bloody way to run the country.

Mr. Alan Williams: Why is the Minister reluctant to show any relevant initiative when he is faced with this critical problem? Will he recognise that this is not a normal rescue case? In addition to needing the appropriate investment decision to which he has referred, there is a desperate need for interim aid to meet the crisis which has followed the collapse of the International Tin Council. The Minister has sat back for six months. He has watched the situation develop, he has done nothing and now he has been caught unawares.
Does not the hon. Gentleman realise that it is not just a matter of 1,300 jobs at Geevor and RTZ, but also of more than 2,000 other jobs in the Cornish community which depend on those mines? The present 3,000 jobs in Cornwall will be impossible to replace now that regional aid has ben diminished to a cosmetic sham. When the Minister eventually makes his penny-pinching calculations, will he recollect that these mines put £26 million a year into the local Cornish economy? What is at risk is not just the viability of the mines, but the viability of a sub-region.
Will the Minister reflect on the fact that, last year, the same mines saved the country £40 million in import substitution? The Minister could rescue the mines for less than the annual £80 million cost of keeping 3,000 miners and dependent workers on the dole queues for two years.

Mr. Morrison: I do not think the right hon. Gentleman is correct when he says that no real initiatives have been taken. During the last few weeks my Department could not have done more in terms of encouraging applications, sifting them carefully and giving guidance on how best they could be put forward. That is the fact of the matter. The right hon. Gentleman suggests that we should go down the route of operating subsidies regardless. On reflection, that would not be the right course to pursue.

Prison Officers' Dispute

The Secretary of State for the Home Department (Mr. Douglas Hurd): Mr. Speaker, I will with permission make a statement on the dispute with the Prison Officers Association.
The House will recall that I set out the issues in the dispute in my reply to a private notice question from the hon. Member for Liverpool, Mossley Hill (Mr. Alton) on 17 April. Since then I have twice met representatives of the national executive committee of the Prison Officers Association. Following my first meeting, I put to them, in writing on 22 April, a package of proposals for resolving the dispute. When I met them again yesterday, POA representatives accepted that my proposals provided a way forward. They undertook in return to consider my request that they call off industrial action in order to allow a resolution on this basis to proceed.
In the event, the POA declined yesterday to go beyond the offer of an undertaking that it would instruct its members not to take action while talks on the basis of my proposals were proceeding. In effect, that amounted to an offer to suspend, but not to call off, its industrial action. But its previous undertaking to suspend had proved ineffective, and damaging industrial action had taken place despite it. So its position yesterday represented no advance on the situation it had taken in talks last week and was not acceptable. The Government cannot conduct talks under the continuing threat of further industrial action in this vital public service.
The POA therefore broke off discussions and has announced that it is considering ways of extending its industrial action, which may include strike action. As I make this statement, it is still not clear what action the POA may take in practice.
I deeply regret this action by the national executive committee of the POA, which shows no regard for the longer-term interests of its members or, equally importantly, for the prisoners in its members' charge. The sort of industrial action that we have already seen at Gloucester prison—where prison officers yesterday took control of the prison and refused to accept the orders of their governor and where they are still refusing to return to normal working—is unacceptable. The Government will take all possible steps both to sustain the right of governors to manage their prisons and to protect prisoners and the public from the consequences of POA action. In this context, a circular will be issued tomorrow to the courts containing advice on the implications for them of the dispute. A copy will be placed in the Library of the House. I shall consider any further measures which may be necessary.
I take this opportunity to make a further appeal to prison officers to look at the package of proposals I have placed before them and to judge whether it is worth throwing that away by taking further industrial action. As I have publicly acknowledged many times, prison officers do a difficult and often dangerous job. They deserve to be well paid. But the heavy burden of overtime must be lightened and there must be increased efficiency.
Progress towards formal discussions about a range of new systems designed to meet all these objectives was being made when the NEC call for industrial action went out. The agenda for talks, set out in my letter of 22 April,

represents a positive way forward for prison officers and, indeed, the whole prison service. I very much hope that even now, prison officers will end their action to avoid lasting damage to the prison service and to their own interests.

Mr. Gerald Kaufman: Two years ago the Government were insisting that industrial action was unacceptable without a ballot. Now they are insisting that industrial action is unacceptable with a ballot: a ballot with 78 per cent. voting and 81 per cent. in favour of industrial action, and a ballot held under the Government's own legislation.
Prison officers carry out a dirty and dangerous job in increasingly difficult conditions, caused by the collapse of the Government's law and order policy and the record crime wave under this Government, which has produced a huge increase in the prison population and unprecedented overcrowding, with as many inmates now as the Home Office forecast for 1993. Prisoners are often three in a cell. They may be locked in their cells for 23 hours and the workshops may be closed.
The Government are spending more money on building prisons but are seeking to save money on running them, with prison officers being left to carry the burden, especially with the extra duties that they now have in servicing the unprecedented number of prisoners on remand. The prison officers have made it clear that they fully agree that it is not their role to control manning levels, but why will the Home Secretary not agree to a proper and sensible role for them in deciding safe manning levels, particularly as the POA has offered to instruct its members to take no further action while talks are going on?
That would be the sensible way of solving these difficulties, and would be much more sensible than the ridiculous antics going on at Gloucester prison. Last night, the deputy governor arrived at the prison gate and announced that he was bringing fish and chips for the governor. Under cover of that fast food, four assistant governors rushed in to take over the prison. Will the Home Secretary repudiate such tactics, and admit that the Government have been planning for this very dispute for many months?
That is demonstrated by the 80-page document that I have with me, which was circulated months ago. It is headed:
Confidential
Association of Chief Police Officers of England, Wales and Northern Ireland
Industrial Action In The Prison Service
Police Contingency Planning
Notes of guidance.
Among other things, the document says:
Confidentiality is most important in relation to contingency planning. Should it become known to the POA that such planning was taking place by police it may result in the escalation of an already delicate situation.
It is a delicate situation, and the contingency planning has become known.
The Government long ago decided that, after other groups of workers whom they had chosen, the prison officers would be their next enemy. I warn the Home Secretary that with his intransigent bungling in this exceptionally delicate area he is recklessly playing with fire.

Mr. Hurd: I always hope for better from the right hon. Gentleman but I am always disappointed on occasions like this.
The neglect that the whole prison service suffers from is the neglect of previous Governments to do anything about prison building—[Interruption.] My right hon. and noble Friend the Lord President of the Council started the prison building programme after years of neglect by others. By now the right hon. Gentleman should know that we have recruited 18 per cent. more prison officers since 1979 while the number of prisoners has increased by 12 per cent. Consequently, it is completely false to say that we are not staffing to match the increased prison population. We have staffed over and above the increase in prison population.
The POA and I thought that last week we were very near agreement on the POA's role in being consulted over manning levels. I wrote the POA a letter which I hope that the right hon. Gentleman will study. The POA wrote back indicating that the contents were very near to what it had in mind. Industrial action then followed. The POA said that it would be willing to suspend industrial action, but it was not suspended. In those circumstances, I am sure that discussions can only fruitfully take place if the POA calls off industrial action.
I entirely disagree with what the right hon. Gentleman said about Gloucester. Yesterday, the situation there was serious, because POA members refused to run the prison in the way that the governor directed. Later, as a result of the governing grades' ingenuity, a number of governing grades were able to enter the prison. The situation is now under control. However, if they had followed the right hon. Gentleman's advice, the situation in Gloucester prison would be out of control.
Of course there are contingency plans. If we had reached this position and it had appeared to the House and the right hon. Gentleman that there were no contingency plans, he would have been the first to jump up and down in excited indignation, wanting to know why we had not foreseen this possibility. But as I said at the end of my statement, I believe that we were close to agreement last week. I also believe that we are close to an understanding now. However, I hope that the POA will understand that it is not possible for any of us to get on with the agenda that we are anxious to discuss while the threat and reality of industrial action hangs over us.

Mrs. Sally Oppenheim: I concur with my right hon. Friend in his general line, and deplore the militant action that has taken place. But will he bear in mind that—as he will know from correspondence that he has had with me—prison officers in Gloucester have been under considerable pressure? That pressure is the result, among other things, of the presence of a special unit in the prison and of at least one prisoner who is suffering from AIDS. Those prison officers have a long history of fine service and non-militancy, and I hope that my right hon. Friend will bear that in mind when discussions resume. Will he give an undertaking to take whatever steps are necessary to protect the citizens of Gloucester if things get out of hand?

Mr. Hurd: Yes indeed. I do not believe that there is any threat to the security of Gloucester prison, thanks to the timely action that the right hon. Member for Manchester, Gorton (Mr. Kaufman) criticised. What my

right hon. Friend has said about the role of prison officers is true, not only in relation to Gloucester but elsewhere. However, in view of some of the things that have been said, I should make it clear that no one has been dismissed as a result of these activities. If the POA staff agree to work normally under management's instructions, they will be reinstated.

Mr. Stephen Ross: As I have three prisons in my constituency and two of them are high security prisons, may I support the call for saner counsels to prevail? Is it not a fact that on Sunday, at least, prison officers at Leicester went back to work at the POA's request? Is the Secretary of State aware of the niggling things that have been introduced into the prison service, particularly in Albany, that payments due to prison officers have been withheld, niggling restrictions have been imposed, and the number of prison officers on night duty, in particular, has fallen to a dangerously low level? Surely it would be possible to renew negotiations with a postponement of industrial action, even though that action has been voted for by a very large majority of the POA. That would be better than calling for absolute abandonment, which is totally unrealistic.

Mr. Hurd: Yesterday I was holding discussions with representatives of the POA. In theory, action was suspended, but in fact action of particularly damaging and disruptive kind was under way at Gloucester, Swansea and Northallerton. One cannot allow such a situation to continue. With his knowledge of these affairs, the hon. Gentleman will understand that we have been recruiting prison officers at a substantially faster rate than the rise in the number of prisoners. However, we are not using them correctly.
There are all sorts of rigidities and inflexible practices which, if we could discuss them constructively with the POA, would be resolved. We could say goodbye to a good many of them, and that would increase the resources available for other purposes within the prison service. That is what I want to get on with, but I cannot do so in the sort of circumstances that obtained yesterday, when in theory action was suspended but in practice it was raging.

Mr. Peter Bruinvels: Will my right hon. Friend accept that, as a Leicester Member of Parliament, I did not agree with the industrial action taken by some of Leicester's prison officers? However, they are under some strain because of the secure wing. May I have my right hon. Friend's confirmation that there will be no surrender, that the courts will not be deterred from passing custodial sentences, and that everything possible will be done to ensure not only that there are custodial sentences but that there is a proper ballot by all prison officers before any further strike action is taken?

Mr. Hurd: My hon. Friend will know that there was a ballot that empowers the national executive to take industrial action but does not compel it to do so. I agree with my hon. Friend and hope the executive will decide in the interests of its members and of the prison service not to use that mandate. My hon. Friend will wish to look carefully at the circular to the courts. I hope he will agree that it does not run counter to the principles he talked about.

Mr. Merlyn Rees: I accept that the problem of running the prisons has been with us


for a long time. It goes back to the Administration in which I was Home Secretary, but also goes back beyond that, to previous Home Secretaries. An approach in narrow party political terms, suggesting that it is all the fault of the Labour Government, will get the Home Secretary nowhere. [Interruption.] The Home Secretary can answer for himself and he does not have to respond. I realise that this is a difficult subject. What was this agreement of a mere few days ago from which all would have been well? Would it not help public discussion to see who was wrong and who was right if the Home Secretary told us what the agreement was?

Mr. Hurd: I responded temperately to the attack by the right hon. Member for Manchester, Gorton (Mr. Kaufman) who said it was all our fault. I had hoped that such an attack might not be made on this occasion but it was made. The right hon. Member for Morley and Leeds, South (Mr. Rees) will absolve me from too much intemperateness in my reply to his right hon. Friend.
My letter of 22 April has already been made fairly well known and is in the Library. That is the letter to the general secretary of the POA in which I set out the understanding upon which we were close to agreement on the role of the POA in being consulted and in discussing manning levels. I went on to discuss the pay claim, which should be about to be negotiated with the Treasury. Obviously, such negotiations cannot take place in present circumstances. I also discussed tax compensation on housing allowances and the whole matter of working practices, which I have already discussed. That is the agenda that I want to get on with and, given his experience, the right hon. Gentleman will understand the importance of that.

Mr. David Crouch: There is a prison in my constituency and I have been meeting prison officers for the last 20 years. I have a high regard for the officers and for the service that they provide, both to the public and to the prisoners. However, I wholly condemn their approach in taking industrial action, just as I wholly condemn the attitude of the right hon. Member for Manchester, Gorton (Mr. Kaufman) who exacerbated the problem by what he said. Can we do something to assist this somewhat silent, forgotten and hidden service? The prison service is somewhat hidden when compared with the police. The officers do not have a parliamentary spokesman and sometimes think that they are somewhat forgotten. I hope that my right hon. Friend can assure them that taking industrial action is not the way to be remembered or noticed.

Mr. Hurd: I entirely agree with my hon. Friend. The prison service has suffered from under-discussion—if there is such a term. It would be a good thing if the House, the political parties and the public in general outside the specialist groups, took a greater interest in the state of the prisons and in what we are doing to remedy the conditions that we find.

Mr. Chris Smith: Is it not entirely understandable that officers at Pentonville prison in my constituency are anxious and angry about the conditions under which they have to perform their duties? That prison was built for 600 and is now housing 1,000 prisoners. Three workshops are being closed down and, because of under-staffing, wings are left for hours at a time

without being patrolled. Those are the problems. What action does the Home Secretary intend to take to tackle those basic issues that lie at the heart of this dispute?

Mr. Hurd: The hon. Gentleman describes the scandal of overcrowding. If he had carried out his research correctly he would know where to attribute the blame for that. As the hon. Gentleman knows, the knotty part of the problem is the high level of overtime. It averages 16 hours a week per officer and makes up for 30 per cent. of average earnings. By any standard, that is too much. We want to discuss with the POA the proper balance between staffing hours and increased manpower and overtime. As the hon. Gentleman will see from the figures that I have given, an increase in manpower is coming through. Out of such discussions could come a new deal that would get rid of some of the present rigid and restrictive practices and add substantially to the prospects for the prison service as a whole.

Mr. John Hannam: I deplore the action taken by the Prison Officers Association but I should like to pay tribute to the prison officers in Exeter prison. It is a remand prison and conditions there have deteriorated over the years. There is severe overcrowding and a shortage of staff. Will my right hon. Friend look again at a subject that worries prison officers—the policy of enforced early retirement? That was imposed in recent years and is a source of great anxiety to prison staff.

Mr. Hurd: I shall certainly look at that, although my hon. Friend will know the reason for it. I agree with my hon. Friend that the rise in the remand population is disturbing. He will know about the efforts that we are making, for example through trials on time limits, to encourage the processes of law to work faster so that there are fewer people on remand.

Mr. Jeff Rooker: I was recently given an answer to a question about Featherstone prison which was wholly misleading. It was about the overcrowding there and the pressure on officers. It is that kind of false information from management to Ministers that causes Ministers to get into the mess that they are in now. I shall be grateful for an early alteration to the answer that I was given.
It is better for Ministers and others who visit prisons such as Winson Green to do so in the early hours of the morning, at slopping out time, instead of at midday. If they did that they would see the real effects of overcrowding and understand why the prison officers have explained that they cannot any more do random searches of the cells. We have reached a ludicrous state of affairs and it is aggravated by people being sent to prison for less than seven days. It is inexplicable that this kind of thing can go on, because it puts unnecessary pressure on already overcrowded prisons.

Mr. Hurd: It is important for Ministers to visit prisons. As the hon. Gentleman knows, I try to do that and my noble Friend who deals with the prison service also visits the prisons. I reject the hon. Gentleman's remarks about the advice and information that we receive from a highly competent prison management. Of course, he is right about slopping out. That sort of thing is a scandal and has its roots in Victorian times. The arrangements made by the Victorians were perfectly acceptable by the standards of that day, but they are not acceptable now. It takes a long


time and a lot of money to put that right, but he will know that we are building 16 new prisons and proposing to refurbish 100 more. A large part of that work will deal with sanitation. We are getting on with the work and the prison officers are well aware of that.

Mr. Ivor Stanbrook: Many people will be surprised to find that it is possible for prison officers lawfully to engage in industrial action or to go on strike. Can my right hon. Friend think of anything more vital to the internal security of the country than the prison service? Should we not consider instituting a no-strike agreement in any settlement of this dispute that may be obtained?

Mr. Hurd: I have a lot of sympathy for my hon. Friend's view. He is not the only person to whom this thought will have occurred. We need to give consideration to the matter.

Mr. Greville Janner: Any enforcement on prison officers of a no-strike agreement would be deeply resented and would remove from them one of the freedoms to which they are entitled. Does the right hon. Gentleman not realise that they have an extremely rough job that is greatly aggravated by wicked overcrowding? If he does recognise that, will he answer two questions? First, will he tell the House something about the circular that will go out to the courts tomorrow, and not leave it to the press to find out about it so that the House cannot question it? Does the circular include provisions for alternatives to imprisonment for people sent to prison for debt? Secondly, has he plans to deal with overcrowding in Leicester prison, which was built for 200 prisoners and is holding 400? It is staffed by people trying to do a good job in the most difficult and sometimes dangerous circumstances.

Mr. Hurd: I shall certainly write to the hon. and learned Gentleman about the plans for Leicester prison. My hon. Friend the Member for Orpington (Mr. Stanbrook) talked specifically about a no-strike agreement, and, indeed, the hon. and learned Gentleman used the same phrase. It is not a question of imposing, but of considering an agreement. That is what my hon. Friend suggested, and that is what I said required consideration.
The circular letter will refer to the fact that if industrial action is taken—I hope it will not be taken—the business of the courts will inevitably be disrupted. The letter will seek the understanding of magistrates courts, and will suggest ways of reducing the burden on the police; for example magistrates courts may be able to adjourn some cases or to grant bail immediately in others. We shall draw attention to difficulties and ask the courts to bear them in mind, while making it plain that we are not seeking to interfere in judicial decisions. As I understand it, that follows closely what was done on a previous occasion. The full text of the letter will be put in the Library.

Sir Kenneth Lewis: Is it not important that the POA and its membership recognise that however much sympathy they may have from the public now—the public recognises the difficulties of their job—it will soon be lost if there is a disaster caused by disruption, especially when the public knows that talks are available to them?

Mr. Hurd: My hon. Friend is right. The public has sympathy for the job which prison officers do. I should like to see more publicity for what they do and the problems that they face. That is entirely understandable. The public also knows that prison officers are not badly paid, in recognition of the difficulties of their job, and that we are willing and anxious to consult them about the future of the prison service.

Mr. Robert Maclennan: Recognising that the resumption of talks is essential if this grave position is not to deteriorate still further, will the Home Secretary say what his present conditions are for the resumption of talks? Is he waiting for the NEC of the POA to extend the effectiveness of its call for the suspension of industrial action, or is he looking to the NEC to take a different line?

Mr. Hurd: I want the NEC to call off the industrial action. In that way we can get on with the real job of discussing real matters.

Mr. Harry Ewing: Does not the Home Secretary's circular come to the nub of the problem? If, as the Home Secretary says, the circular will explain to the courts the problems of overcrowding in the event of a strike by prison officers, and will recommend a number of options to be exercised by the courts and the police in the event of a strike, why on earth cannot those same options be operated when there is no strike and no industrial action? Could they not go a long way towards preventing the position that the Home Secretary has brought the prison service to?

Mr. Hurd: Obviously they can. The hon. Gentleman is right. The granting of bail and the timing of cases are at the discretion of the courts. The hon. Gentleman will know that recently I have several times gone out of my way to urge the courts to consider tough and practical alternatives to custody for relatively minor offences. Indeed, I have to some extent stuck out my neck on that point. It is also right in these circumstances, where we may be under a serious threat of industrial action, that in striking the balance in each case, the courts should have regard to the position. That is the purpose of the circular.

Mr. John Ryman: May I draw two specific points to the Home Secretary's attention? The first relates to prison officers' pay. Is not the crux of the problem that the basic rates of pay are so bad that officers are forced to engage in what are sometimes considered to be excessive overtime duties, such as accompanying prisoners to court, because without overtime their wages are unreasonably low? Is not the answer to raise the basic pay so that officers are not forced to rely on overtime? One may disagree as to whether they are working excessive overtime, but that is the motive behind it.
Secondly, does not the Home Secretary's circular, undoubtedly couched in moderate and temperate language, interfere with the judicial process? The judiciary is well aware of its powers of sentencing other than a sentence of immediate imprisonment. Surely it is not for the Home Secretary but for the Lord Chancellor to guide the courts on sentencing policy?

Mr. Hurd: I would not dream of issuing even a modest circular of this sort without the approval of my right hon. and noble Friend the Lord Chancellor. It specifically does not seek to interfere in judicial decisions. The hon.


Gentleman is entitled to his view about what decent rates of pay are, and there is obviously room for argument and negotiation on that. It is an irony that negotiations precisely on that point were about to begin between the POA and the Treasury, which has responsibility for such negotiations. Obviously, such negotiations cannot take place while industrial action is under way or threatened.

Political Parties (Income and Expenditure)

Mr. David Winnick: I beg to move,
That leave be given to bring in a Bill to provide for a limit on the amount of money which may be spent by or on behalf of a political party during the period of a general election campaign: to require companies to establish a political fund from which all political donations shall be made; to provide for a ballot of shareholders and employees before a political fund is established; and to ensure an entitlement for each shareholder to an additional dividend from the company in lieu of any donations to which such shareholder has objected.
For more than 70 years it has not been possible for unions to donate money for political purposes without balloting their membership about whether a political fund should be established. There was never any controversy about that, and unions never complained that a political fund was required by law. However, the Government were not satisfied with the position, so legislation was introduced to require unions to ballot their members every 10 years if they wish to retain a political fund. The first such ballot had to take place by the end of March this year.
The legislation was, understandably, clearly seen as a rather crude and clumsy attempt by the Conservative party to undermine financial support for its main opponents. In the event, every union with a political fund secured a massive majority for a "Yes" vote. Indeed, two unions which did not have political funds won majorities to establish them. Who knows, other such unions may secure such a majority.
If it is right for unions to have to establish a political fund to contribute to a party, why should not the same apply to companies? Why the glaring difference in law? Today, I am seeking leave to introduce a Bill—an extremely modest measure— to ensure that companies must ballot shareholders, and employees with more than 12 months service—that is only fair—on whether a political fund should be established. Under the measure it would be illegal to donate to a political cause without such a fund. In this matter the law should apply to companies and unions alike.
It is also right and proper that in any such arrangement provision should be made for shareholders who do not want to contribute to a political fund to be compensated by some extra shareholding, in the same way as during the past 70 years trade unionists who did not want to donate for political purposes could contract out. I am merely seeking the same provisions for companies as apply to trade unions.
The Economist of 22 June 1985 commented:
In practice, the directors of a company now arbitrarily decide how much to give to a party—usually the Conservative party or one of its front organisations. Their decision is simply noted in the directors' report, which is usually passed on the nod at the company's annual meeting.
In the same article The Economist said that, unlike the Labour party, the Tories, Liberals and SDP do not publish a full set of financial accounts. As we all know, the truth is that the whole area of Conservative party finance is rather murky. It is understandable that there are some Conservatives, such as Mr. Eric Chalker, who believe and have campaigned that the Conservative party should publish full accounts. I also note that Mr. Chalker is keen on democratic accountability in the Conservative party, and on the chairman being elected.
A recent MORI poll on public attitudes to political donations found that 51 per cent. of those asked felt that companies should not be allowed to make political donations and only 35 per cent. were in favour. In the same poll, 82 per cent. believed that companies making donations should first consult their shareholders. So public opinion on this particular issue is very clear. I see no reason for discrepancy between trade unions and companies which make contributions in the political sphere.
Since this Government took office seven years ago—I do not want to be personal, but I think that this information should come out—64 industrialists have been awarded knighthoods. Of these, 69 per cent. are directors of companies which have given £4·5 million to the Tory party since 1979.

Mr. Tony Banks: It is a fiddle.

Mr. Winnick: Of the 11 industrialists who have gone higher, who have been given peerages, six are directors of companies which are among the top 10 financial donors to the Tory cause.

Mr. Tony Banks: Come back, Lloyd George.

Mr. Winnick: These companies give money either directly to the Tory party or to front organisations like British United Industrialists. I am not sure on occasion which has more front organisations, the Conservative party or the Communist party.
In turn the Government favour their friends and financial backers, as in the Finance Bill, which is to be debated today, and in previous Budgets. There is a clear need for reform as quickly as possible.
The next reform that I seek in this very modest measure is to ensure a limit on expenditure by political parties during a general election campaign. We all know that there is a limit on expenditure on behalf of parliamentary candidates. There is no controversy about that. It is right and proper that no very rich candidate is able to secure election by buying votes. If it is correct for there to be quite a tight limit on expenditure by candidates, why should there not be a limit nationally for political parties? Why should a political party be able to spend as much as it likes? Here again there is a clear discrepancy between the national and local scene. In the last election the Tories had some £15 million to £20 million to spend. It may well be that they decided not to spend the lot, but they could have done so, and they could have spent much more. My party had as its maximum some £2·5 million. So we need to ensure that this reform is effected.
If I am asked what should be the ceiling on political party spending during a general election campaign, being a generous-minded sort of person I would say that, at present-day prices, it should be around £5 million. This amount could always be updated just as the amount of money that can be spent on behalf of a candidate is periodically updated to take account of inflation.
I do not know whether my Bill is to be opposed. If there are Conservative Members who oppose in any way what I have put forward, I hope that they will have the guts to oppose it today. That is far better than to get the Whips to oppose me and to shout "Object" one Friday afternoon.
If the Conservative party believes that my proposal is wrong, why does it not oppose me and vote against it today? If I am to be defeated in a Tory-dominated House of Commons, so be it, but if I am to be given leave, it is only right that the Cabinet should find time for me to process my Bill. I see no reason why, at the Cabinet meeting, say, on Thursday, this item should not be top of the agenda, or why the chairman of the Conservative party and perhaps the Leader of the House should not ensure that, having been informed that this Bill has been passed without opposition, I have sufficient Government time to make progress and to ensure that my proposals become law before the next general election.
That is only right and fair, so I shall assume that if there is no opposition today the Cabinet will decide along the lines that I have suggested.

Question put and agreed to.

Mr. David Winnick: It is clearly the unanimous wish of the House of Commons to support the Bill, Mr. Deputy Speaker, and that only strengthens what I have said about being given Government time to progress the Bill.
Bill ordered to be brought in by Mr. David Winnick, Mr. Tony Banks, Mr. Dennis Canavan, Mr. Terry Davis, Mr. Derek Fatchett, Mr. James Lamond, Mr. Austin Mitchell, Mr. Allan Rogers, Mr. Brian Sedgemore and Mr. Robert Sheldon.

POLITICAL PARTIES (INCOME AND EXPENDITURE)

Mr. David Winnick accordingly presented a Bill to provide for a limit on the amount of money which may be spent by or on behalf of a political party during the period of a general election campaign; to require companies to establish a political fund from which all political donations shall be made; to provide for a ballot of shareholders and employees before a political fund is established; and to ensure an entitlement for each shareholder to an additional divident from the company in lieu of any donations to which such shareholder has objected; And the same was read the First time; and ordered to be read a Second time upon Friday 6 June and to be printed. [Bill 147.]

Orders of the Day — Finance Bill

Order for Second Reading read.

[Relevant document: Fourth Report of the Treasury and Civil Service Committee, House of Commons Paper No. 313 of Session 1985–86.]

The Chief Secretary to the Treasury (Mr. John MacGregor): I beg to move, That the Bill be now read a Second time.
The Finance Bill embodies the legislative implications of my right hon. Friend's Budget six weeks ago. That Budget was set in the context of an unprecedented drop in the oil price, which meant the prospective loss of half our oil tax revenues from the North sea. But the underlying strength of the United Kingdom economy, and particularly the healthy growth of profits, mean that non-oil tax revenues are buoyant. So my right hon. Friend was still able, within the context of a prudent and cautious Budget, to propose a further net reduction in the burden of taxation of almost £1 billion, while at the same time announcing a modest reduction in the planned public sector borrowing requirement for 1986–87 to £7 billion.
Against the background of the fall in oil revenue, the imaginative proposals in this very positive Budget have come as a pleasant surprise to many who had perhaps underestimated the underlying strength of the economy and overestimated the degree to which, so it was thought, we remained an oil-based economy. Both perceptions have now changed, not least internationally.
The Budget has also received an encouraging initial response which has been maintained ever since. It was welcomed by representatives of business, large and small. To quote a survey of business opinion by Binder Hamlyn:
Businessmen are by and large happy with Nigel Lawson's Budget last week. The result is seen as good for their companies, with positive effect on macro-economic indicators, too.
The moves to spread share ownership further were welcomed by the stock exchange and the Wider Share Ownership Council; the moves on charities were given a unanimous welcome by all those involved in charitable work and the arts. The Secretary-General of the Arts Council saw the move as
an important and much-needed supplement to basic government funding.
The Association for Business Sponsorship of the Arts was reported as seeing a direct benefit of £7 million a year—with the potential to go much higher. The president of the Union of Independent Companies described the scrapping of capital transfer tax on lifetime gifts as
the most significant shot in the arm for the unquoted independent company sector for 50 years".
The fact that the Chancellor did not need to increase duties on drink raised the spirits of the Scotch Whisky Association and the brewers.
But the positive reaction was not confined to those with a direct interest in the Budget. The prudent yet imaginative course that the Chancellor was able to steer has meant that interest rates have fallen—base rates have come down 2 per cent. since Budget day. That, in turn, has allowed major building societies and banks to lower their interest rates, by 1·75 to 2 per cent., with an extra reduction of 0·5

per cent. for many of those with endowment mortgages. This will be of direct help to the eight million home owners with a mortgage loan. That, in turn, has contributed to the prospect of a rapid fall in inflation. Even before the mortgage reductions, inflation had fallen from 5·1 per cent. in February to 4·2 per cent. in March.
So the prospect now is for low inflation combined with sustained growth. That was acknowledged by the Treasury and Civil Service Select Committee in its report on the Budget, which was published with its usual impressive speed last Friday. Today is not the time to discuss the Committee's report in detail, as it makes no comment on the tax changes in the Budget, which is what today's debate is about, but concentrates on the conduct of monetary policy, which my right hon. Friend the Chancellor discussed comprehensively in a speech to the Lombard Association on 16 April. The Government will respond to the Committee's recommendations in due course.
In this year's Bill, the most important change, in terms of its impact on the majority of taxpayers, is the reduction in the basic rate of income tax to 29 per cent. in clause 15.
The Government's objective has been, and remains, to reduce the burden of income tax for people at all levels of income. In 1979 my right hon. and learned Friend the then Chancellor cut the basic rate from 33 per cent. to 30 per cent., helping the vast majority of taxpayers, and reduced the higher rates to a much more realistic level, improving incentives for those in the higher income brackets. I note that the Labour party has already declared its intention of restoring—indeed, even worsening—the position of those people. To raise the £3·6 billion of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) from this group would mean not only increasing the severity of capital taxation and reintroducing investment income surcharge at the indexed equivalent of their 1978–79 levels, but imposing a 70 per cent. tax rate on all taxable incomes above £18,600—hardly the way to retain incentives in the economy and encourage enterprise and risk-taking. I firmly predict that if the Labour party ever returned to power, that commitment, like so many of its others, would be a job destroyer.
Up to 1985–86 there was no further change in the basic rate, while the main personal allowances were progressively increased in real terms by a fifth over their 1978–79 levels, taking 1·4 million people out of the income tax net altogether compared with an indexed 1978–79 tax regime.
This year, as my right hon. Friend explained in his Budget, as I did during the course of the Budget debates, we decided that it was right to concentrate tax cuts on the 95 per cent. of all taxpayers for whom the basic rate of tax is their marginal rate, both to reduce their tax burden and to improve their incentives. It was for that reason, against the background of the substantial real increase in allowances under the Government, that my right hon. Friend this year announced a cut of 1p in the basic rate. That cut also improves incentives for unincorporated businesses, 90 per cent. of which pay tax only at the basic rate, and we have mirrored it with a reduction to 29 per cent. in the small business corporation tax rate.
The reduction of 1 per cent., which is all that could be prudently afforded this year, is in itself relatively modest. But, as my right hon. Friend explained, that 1 per cent.


reduction is a further step towards achieving our long term objective of reducing the basic rate to no more than 25 per cent.
I have already dwelt at some length during the Budget debate itself on the case for this cut in basic rate this year as against concentrating resources entirely on thresholds, so I shall not dwell on those arguments again today. But let me add one further point. The case for reducing the basic rate this year is reinforced when one looks at our international competitors. The United Kingdom's income tax thresholds, which, as I have said, we have increased substantially in real terms since 1979, are around the middle of the range compared with other major developed countries. Indeed, as a proportion of average earnings, our thresholds are significantly higher than those in the United States, Canada and West Germany. However, they are still below the levels of certain other countries, notably France.
It is on the starting rate of tax that we are really out of line. In the United States and Japan the starting rate is 15 per cent., or less. In France, West Germany and Italy the percentage rates are no higher than the mid-20s. Our starting rate of 29 per cent. is still the highest of the seven major industrial countries, and that is a further reason for acting on the basic rate this year.
But the Government remain committed also, to raising the level at which people start to pay tax. The Green Paper on personal tax reform shows how we could increase thresholds in a way which is more cost-effective and recognises the changes in a family's needs over its life cycle.
This year, not only have we reduced the basic rate, but the main personal allowances will still be indexed under the provisions of section 24 of the Finance Act 1980, so there is no need for this to be provided for in this year's Bill. As the House knows, the higher rate thresholds are all increased by £1,000—less than the amount needed to index fully the thresholds for the 45 per cent. and above higher rates. The effect is to reduce the gains from the basic rate cut for those on higher incomes, so that the 60 per cent. taxpayer, for instance, gets broadly the same as under statutory indexation without a basic rate cut.
The overall effect of the income tax changes this year is not at all inconsiderable. The cumulative effect of successive Conservative Government Budgets is very considerable indeed. Income tax liabilities in 1986–87 will be about £8 billion lower than if the rates and allowances which we inherited from the Labour Government in 1979, indexed to 1986–87 levels, were in force. That is the true mark of the difference between us so far. As for this year's changes, one has to take into account not the tax changes alone, but the beneficial effects which have flowed from the interest rate changes since the Budget itself and which a prudent Budget helped to encourage.
For a married man on average earnings, with a typical outstanding mortgage of £15,000, the Budget income tax changes, combined with a 1·75 per cent. cut in mortgage rates since the Budget, can mean a total gain of £5·80 a week. That is a significant figure, and I repeat the message that I gave in the Budget debate: that employers and employees should take heed of this boost to real take-home pay—a boost which does not damage the competitiveness of British goods—and take it very much into account in their pay negotiations.

Mr. John Townend: Did the Treasury take that into account when it recently made an offer of 6 per cent., which I would have thought is rather high in view of the estimated level of inflation?

Mr. MacGregor: That was obviously one of the factors that was taken into account, but I remind my hon. Friend that the negotiations that he is talking about in relation to Civil Service pay relate to the pay year for which most settlements have already been decided. Therefore, it is significantly below the settlement for the same year for the local authority manual workers, the full amount that the teachers are getting in that pay year and the private sector generally. I am talking here particularly about the pay settlements that are to come.
A number of other major points arise from the Bill which I should briefly draw to the attention of the House, and I deal just with clauses 2 and 3. The House will recall that, despite the dramatic fall in oil prices and the consequent loss of tax revenue, my right hon. Friend introduced a Budget which was tax-neutral for the motorist, to the surprise and delight of everyone but the Opposition. The increase in road fuel duties over revalorisation was, of course, offset by the standstill on vehicle excise duty for cars and most other vehicles, so the burden of duty on the motorist was not increased in real terms.
When announcing that move, my right hon. Friend said that there was no need for the pump price of petrol to go up at all. The Opposition no doubt felt that they had to try to get some political mileage out of the motorists' package, so they attempted to pour heavy scorn on my right hon. Friend's judgment on that point. The right hon. Member for Sparkbrook said:
I can't understand why Mr. Lawson said he believed they wouldn't pass it on, they are a monopoly, they rig their prices. The idea that they might say Mr. Lawson would like us not to pass the price on so we won't is frankly ludicrous.
In a television programme in which I took part the right hon. Member for Leeds, East (Mr. Healey) said that my right hon. Friend was
silly and foolish to imagine that they"—
the oil companies—
wouldn't add this tax to the price to the consumer.
The Opposition, led by the right hon. Member for Islwyn (Mr. Kinnock), demanded the immediate imposition of a windfall tax on oil company profits to force them to make the move.
Once again, competition, rather than Government interference, has had its effect and proved my right hon. Friend to be totally correct. His judgment, as against that of the Opposition, has been wholly vindicated. There is a marked variation in prices, because competition is working, and in some garages prices are now below 160p a gallon.

Mr. D. N. Campbell-Savours: In some areas.

Mr. MacGregor: But what is clear is that petrol prices have not only absorbed the increase in road fuel duties; they have actually come down since the Budget.

Mr. Campbell-Savours: Does the Minister accept that in many parts of the country there has been very little movement in petrol prices? It was to those parts of the country that we were addressing ourselves. What is he going to do about those areas? Does he intend to do nothing about them?

Mr. MacGregor: I believe that it was across the country as a whole to which the Opposition were addressing themselves when they talked about petrol prices. In most parts of the country petrol prices, as the AA confirms, are now well below the levels at which they were during the Budget. What is more, within individual parts there is wide variation. Therefore, taking the generality, what I say is right and my right hon. Friend has been proved to be correct.

Mr. Roy Hattersley: Will the Chief Secretary tell us whether he thinks the reduction in petrol prices reflects the reduction in oil prices before and since the Budget? Does he not understand that had there not been the imposition of this tax, there would have been a further movement downwards to reflect the reduction in oil prices?

Mr. MacGregor: That is extraordinarily different from what the right hon. Gentleman was saying at the time of the Budget, so he has admitted that my right hon. Friend's judgment was right. In tax terms there has been no real increase for the motorist at all as a result of the Budget. Therefore, the drop in petrol prices—which is, of course, because of the fall in oil prices before and after the Budget—has been properly reflected. What the right hon. Gentleman was trying to get over was that somehow or other petrol prices would go up in real terms as a result of the Budget changes. That has been proved to be totally wrong.
I wish next to draw the House's attention to clauses 26 to 30 of the Bill, which contain the provisions for my right hon. Friend's proposals to extend the scope for charitable giving. Our aim is to stimulate giving by both companies and individuals. Non-close companies will now be able to gain tax relief for single gifts to charities up to a limit of 3 per cent. of ordinary dividend payments, and individuals will be able to take advantage of the abolition of the higher rate limit on convenanted donations and the new payroll giving scheme which will operate from next April.
These provisions have been warmly received by charities. For instance, the Institute of Charity Fund-Raising Mangers has said:
This is the most exciting and imaginative Budget for charities there has ever been.
The Charities Aid Foundation described them as
more radical and far-reaching than we could have hoped for.
I am sure that the House will share those sentiments.

Mr. Patrick Jenkin: Can my right hon. Friend offer some comfort that the Government will look at the provisions of clause 29, which makes a perfectly reasonable effort to curb abuse of the private foundations? There is a widespread view that the numbers written into the clause have gone too far and may damage some very important charitable bodies.

Mr. MacGregor: I know that my right hon. Friend shares our intent in the proposals in clause 29, to which he drew attention. These are aimed at misuse of the tax reliefs for charities, which it was felt were justified anyway, but especially now, I think, in the light of the substantial extensions of tax relief. They are not intended to apply to the ordinary charities that do not misuse them. They apply only to a restricted class of private indirect charities, not to charities which spend at least 90 per cent. of receipts on genuine charitable activities. I am aware of the concern of genuine charities, and I know that

representations are being made. I believe that we shall have a full discussion of these points in Committee. I take note of my right hon. Friend's point.

Mr. John Butterfill: I notice that my right hon. Friend did not refer to clause 31. I hope that he will take credit for that clause, which will make an important contribution to curbing some of the abuses that we are all anxious to curb.

Mr. MacGregor: I did not refer to it because I do not think that I can refer to all the clauses in what turns out to be, yet again, a rather large Finance Bill. However, I am grateful to my hon. Friend for his point, and I am glad that he has made it.
I turn briefly, to corporation tax. There are no major changes to business tax this year, which sees the completion of the reforms begun in 1984. These reforms were aimed to reduce the distortions imposed by the tax system—notably the bias in favour of capital and against jobs—to improve efficiency and encourage enterprise. We see no case for changing this structure, and believe business welcomes the stability and certainty which our approach provides. The United Kingdom's corporation tax rate is now, at 35 per cent., the lowest of any major industrial country, and the reduction in the basic rate of income tax has enabled us to reduce also the small company's rate of corporation tax to 29 per cent. When one bears in mind that at the time this Government took over from the previous Labour Government the small business rate was 42 per cent., one sees the significant reduction in the small business corporation tax to 29 per cent.
Chapter II of part II of the Bill does, however, include two detailed business tax measures—first, to bring the mines and oil wells allowances regime broadly into line with the new structure of capital allowances. Secondly, the Bill would allow a full measure of depreciation for tax purposes for short-life agricultural building and works by providing the option of making balancing adjustments on their disposal.
I deal next with the provisions in the Bill on stamp duty, two of which I wish to refer to particularly. As the House will recognise, it is not possible to consult fully ahead of the Budget on tax changes. First, the new tax proposed in the Budget on the creation of certificates representing the deposit of shares, such as American depositary receipts, or ADRs, has led to a good deal of misunderstanding of the Government's intentions. Let me correct that misunderstanding.
We do not want to discourage American investment in British shares. We recognise, as many of the British companies concerned have told us, that it can have advantages for them. It can make it easier for them to raise money and to expand sales in the United States. We have had extensive consultations with the companies and we understand their views about that.
Our concern is only to protect the tax revenue. Stamp duty on shares, even at the new 0·5 per cent. rate, should bring in £600 million during the current year, and we cannot allow that large sum to be put at risk by investors turning to the purchase of depositary certificates, which trade free of stamp, instead of the underlying shares. There is the possibility, especially after the big bang, of more use of ADRs by British investors, although I recognise that ADRs have some disadvantages for them.
The solution we have sought is to tax these depositary certificates—and similar arrangements—at a rate which will, broadly speaking, eliminate the incentive to use them for tax avoidance. This means that the tax on the creation of the certificate must broadly recompense for the loss of stamp duty on subsequent sales and purchases. From the point of view of the investor, he will be getting a transferable "season ticket." He pays more now, but subsequent transfers are free of duty.
We have re-examined the rate of the tax against this criterion and in the light of the representations we have received. We have decided that the revenue should be sufficiently safeguarded if the tax on conversion of shares into ADR and similar forms were put at 1·5 per cent.—three times what the duty on registered shares will be after the big bang. This is the multiple that has applied for some years to issues of shares into bearer form, and ADRs themselves are effectively bearer certificates. The tax on all bearer shares from the big bang will also therefore be set at the level—1·5 per cent.
The rate of 1·5 per cent. on conversion of shares into ADRs will apply from 19 March. This rate, we judge should be sufficient to safeguard the revenue without adding unreasonably to the financing cost of United Kingdom companies overseas. It compares with the rate of 1 per cent. that applied before the Budget. I must, however, give due notice that if after big bang it looks as if ADRs are being used as a means of avoiding stamp duty by United Kingdom residents, we would have to reconsider the rate of tax.
I now turn to loan stocks. The Budget proposed that most of these should bear stamp duty at the rate of 0·5 per cent.
Since the Budget there has been a sharp fall in long-term interest rates, and there are signs that the sterling corporate bond market is reviving.

Mr. Robert Sheldon: Does the right hon. Gentleman know how much the Revenue will lose as a result of ADRs moving from 5 per cent. to 1·5 per cent.?

Mr. MacGregor: One has obviously to make estimates, but I shall come to that in a moment, if I may.
There is also some evidence that the withdrawal of exemption from stamp duty is diverting some borrowers in issuing bearer and Euro-sterling stock.
In the light of this, we have decided that it would be right to restore exemption for those categories of loan stock that were previously exempt. Registered convertibles will, however, continue to be taxed like equities, as they were before the Budget. We shall make proposals accordingly in Committee. If they are agreed, the exemption for ordinary loan stock would be restored one month later.
Details of these changes will be given in a parliamentary written answer and Inland Revenue press release later today. The estimated yield from stamp duty, as forecast at the time of the Budget, remains unchanged. Any reduction in revenue arising from the changes that I have just announced should be offset by the higher yield we now expect from the application of stamp duty to takeovers.
The adjustments that I have just announced to our proposals for stamp duty will help maintain the range of

options available to companies in financing investment. They will also help maintain the depth and breadth of London's financial markets, and London's role as a major financial centre. I am glad also to be able to announce now a proposal that, though not part of the Finance Bill, should help further in both respects.
We have decided to remove the constraint imposed by the Banking Act which prevents companies from financing themselves by issuing sterling commercial paper—that is, by issuing sterling debt securities of less than one year maturity. The establishment of a sterling commercial paper market should provide a useful alternative for companies to bank borrowing and also extend the range of sterling markets available in London to investors. Further details are being provided in a written reply published in today's Official Report.
I should mention two further measures that the Government will have to introduce at a later stage. The first will set out provisions to withhold tax at source from payments made to non-resident entertainers and sportsmen, announced in the Budget. The second will give effect to the proposals announced by my right hon. Friend the Home Secretary in written answers, on 26 February at columns 564–5 and on 27 March at column 549, to make changes to the structure of the ITV levy.
I move on now to the enterprise and small business package in the Budget. Some of the measures—for example, in relation to the loan guarantee scheme—do not require legislative action in the Finance Bill itself, but the business expansion scheme does. The scheme has proved a great success, attracting more than £100 million a year from subscribers.
The Peat Marwick report, published on Budget day, found that, on the basis of a survey of 1983–84 investments, 70 per cent. of the money invested would not have been raised by companies in the form of equity and almost half would not have been raised at all. Two thirds of the total BES finance raised in that year was invested in companies less than five years old—those which typically have greatest difficulty in raising finance through other methods. The BES has been particularly helpful to firms wanting to raise relatively small amounts of capital. More than half of the companies in the survey raised no more than £50,000.
That survey, and much anecdotal evidence of the benefits of BES since, have justified the introduction of the scheme and shown that, broadly speaking, it is achieving its objectives. Clause 38 provides for the indefinite extension of the scheme and for improvements to ensure that capital is not diverted to low-risk investment in companies with high asset backing—in other words, that it is targeted on the original objectives. This scheme is enhanced with the provision of capital gains tax exemption for the first sale of new BES shares.
These proposals have also been widely welcomed by the CBI, by the Union of Independent Companies and by other representative bodies. I was glad to see that the right hon. Member for Islwyn, in response to the Budget, was moved to say:
we sincerely welcome some aspects of the Budget. I think, for example, of the provisions relating to the business expansion scheme both in its continuation and its exclusions, which appear to be sensible and helpful."—[Official Report, 18 March 1986; Vol. 94, c. 185.]


I am delighted that he has become converted to the encouragement of risk-taking and of venture capital investment through the tax system.
We have made a further important move to boost enterprise. We have had repeated representations from those who work hard to build up family businesses and family farms, and then, as they expand, face a potentially crippling capital transfer tax charge. That is no way to encourage enterprise and initiative. That is the main reason why we propose to abolish CTT on lifetime gifts to individuals. Part V sets out our proposals, which include detailed provisions to protect the continued charge on transfers on death. It is significant that 74 per cent. of the business men surveyed by Binder Hamlyn immediately after the Budget felt that the change would help here.

Mr. Campbell-Savours: They were not going to say no. Grow up, man.

Mr. MacGregor: I do not think that the hon. Gentleman has any conception of what it is to build up a small business, to expand, and then find, all over the place—

Mr. Campbell-Savours: I have built up a small business.

Mr. MacGregor: In that case, the hon. Gentleman has no conception of what most others in the business world say about the impact of capital transfer tax. It is significant that some of the fastest expanding small businesses regarded this as one of the most significant moves that could be taken in the Budget. It is also significant for family farms. We shall be introducing additional inheritance tax provisions at a later date, first, to ensure that regular premium payments made after Budget day under an insurance policy taken out before then are taken out of the gifts with reservation regime, and, secondly, to deal with the consequences for the heritage of the shift to inheritance tax.

Mr. Robert McCrindle: Why does there appear to be some retrospective effect in this year's Budget? Any individual who effected a tax mitigation scheme on the morning of or up to 3.30 pm on Budget day is being caught in a retrospective way and in a fashion that I cannot recall having been introduced in a Budget before.

Mr. MacGregor: I know the point that my hon. Friend is making, but I am sure that he will recognise that my right hon. Friend the Chancellor must have a point at which tax changes are introduced, and they are normally when the Budget is introduced.

Mr. McCrindle: I apologise for pressing the point further. That would be understandable, but my hon. Friend will recall that the Budget was introduced at 3.30 pm on 18 March. I am referring to legitimate arrangements, effected before that time on that day, which are being eliminated. That introduces an element of retrospective legislation.

Mr. MacGregor: There is a difference between such changes in the law and when the Chancellor announces genuine retrospective legislation. This matter can be looked at when we come to the detailed points in Committee.
The final strand in our enterprise package is to encourage people to put their money into business. We

have already made exceptional progress with our target of broadening share ownership. New figures from a poll carried out by National Opinion Polls reveal that the proportion of individual shareholders in the population has doubled since 1979, from 7 per cent. to roughly 14 per cent. With all the statistical qualifications that anyone might wish to make, there is no doubt that that shows that this is a solid and most encouraging advance. Interestingly, over half of all shareholders are now from socio-economic groups C, D and E. The revolution in attitudes towards individual investment has begun.
We are determined to build on this success. A key element will be the new personal equity plan. As the House knows, the Bill provides the outline of the scheme. Our intention is to allow tax-free build-up of investments of up to £200 a month in shares over a minimum period. The details will be set out in regulations, after consultation with interested parties.

Sir Peter Hordern: My hon. Friend talked about research into the socio-economic groups that has been done through National Opinion Polls. Does he agree that some people in those groups who may not know much about investment would be better protected by being allowed to invest in investment trust shares, thereby gaining a wider spread? Will investment trusts be included under the Bill's proposals?

Mr. MacGregor: Again, this is a matter on which we have been receiving representations and my right hon. Friend the Chancellor will take them into account in the consultations. The consultations will enable us to tailor the scheme to meet the requirements of potential investors and plan managers, and thus ensure that it can be taken up as widely as possible. That is our intention. This scheme will give the private investor a substantial incentive to take a direct stake in British business, and it will also help to counterbalance the considerable fiscal advantages already enjoyed by institutional investors.
Finally, there is one area of remaining concern in the economy which, although not in the Bill, the House might expect me to mention—employment. Last Thursday, in the House, my right hon. Friend the Lord Privy Seal suggested that it could appropriately be discussed today. Of course, the latest unemployment figures were disappointing. However, perhaps that obscured the encouraging announcement of a fact that emerged at the same time of the success of the economy in creating net new jobs—almost 1 million since June 1983. Continued employment growth can be expected as output grows this year and next, and it will be faster still if pay increases more in line with productivity.
The Budget has supplemented what was already an ambitious and wide-ranging Government programme of specfic employment measures. By 1988–89 we shall be spending nearly £3 billion on employment measures, plus the youth training scheme. I shall not discuss them in detail today as we did that in the Budget debate. However, I must repeat that those are substantial sums.
We are often urged to spend more by Opposition Members and recently by the Select Committee on Employment, which put forward proposals aimed, so it claimed, at creating 750,000 extra jobs. The Government have considered the proposals in that report. On the Committee's own assumption it would be necessary to look for 1·25 million extra jobs to support the 750,000 the


scheme was designed to create. That could be done only at substantial extra cost. The Department of Employment estimated that the net cost would be £4 billion on top of what we are already spending.
The report was short on prescriptions on how to finance that. If it were financed by reducing expenditure elsewhere, the net effect on jobs would be much smaller. Indeed, it could be negative because it would be replacing more cost-effective employment measures. If it were financed by higher taxation, incentives would be damaged and that would lead to job losses. If it were financed by higher borrowing, the likely result would be higher inflation and interest rates and higher costs to industry. So the job creation programme on that scale would end up destroying jobs in the private sector. Temporary jobs would be bought at the expense of permanent jobs in the rest of the economy.
Those who wish to see a major expansion of employment measures also ignore the practical constraints. It is not clear that there is scope for a major expansion of places on the community programme or similar schemes. There are limits to the number of cost-effective schemes that can be developed. There are limits to the extent which health and social services could absorb unskilled labour. There are limits on the number of sponsors we could attract.
In contrast to the Select Committee, the Government's aim is based on providing direct practical help to the long-term unemployed who need it most. The restart programme will mean that everyone unemployed for a year or more will be contacted and offered an interview at a local jobcentre. They will then be offered a range of ways towards finding work.

Mr. Deputy Speaker (Mr. Harold Walker): Order. I know that conventionally we have a wide-ranging debate on Second Reading, but the Minister is going very wide of the matter before the House. He has invited the House to debate employment measures rather than the Finance Bill.

Mr. MacGregor: I felt it necessary to make a brief reference to those matters because the Lord Privy Seal suggested that they might be raised in the debate.

Mr. Deputy Speaker: Order. The Chair will be responsible for the scope of the debate within the rules of the House.

Mr. MacGregor: I understand, Mr. Deputy Speaker, so I shall move straight back to the position on the economy as a whole.
These specific measures, which we have introduced in the Budget, although I agree not in the Finance Bill, should be seen against the background of the Government's overall economic policy. That strategy is designed to encourage enterprise and efficiency. Low inflation and lower taxes are vital to secure the growth that will produce more jobs. That strategy has produced nearly 1 million new jobs over the past three years. I accept that that is not enough to absorb fully the major increase in people coming on to the labour market, but it is a better record than the rest of our European partners combined.
That strategy would be severely undermined if we were to depart from implementing realistic, practical and cost-effective employment measures. A wholesale boost, at substantial additional public expenditure cost, would create a few temporary jobs, but at the price of putting brakes on economic growth and the accelerator on inflation. That is why I believe that the policies being implemented in the Bill are right.

Mr. Peter Rees: There is one area of the economy to which my right hon. Friend has not directed his attention, although there are few measures in the Financial Bill, and that is the production of oil in the North sea. I readily declare an interest as the director of an oil company. My right hon. Friend and the House will be aware that as the price of oil climbed, so the petroleum revenue tax was restructured in various degrees to ensure a proper take for the Government. As the price of oil has declined sharply to the point that it may discourage exploration and development in the North sea, would my right hon. Friend perhaps concede that there might be a case for a further and fresh look at the structure of PRT, especially advance PRT?

Mr. MacGregor: I know that my right hon. and learned Friend takes the closest possible interest in these and all other tax matters. As he knows, the present oil taxation system is durable and flexible and is highly sensitive to movements in oil prices. The Government are not convinced that any change is needed. However, we have made it clear that we shall continue to watch the situation closely and keep in contact with the industry.
I was concluding by saying that, given the financial constraints which limited my right hon. Friend the Chancellor's room for manoeuvre this year, the Finance Bill contains an impressive range of measures of tax relief and tax reform, which will reduce the burden of tax within a sound overall economic strategy. Those measures have been well received by business, those involved in fund raising and those who want to see more people own shares. The fall in interest rates since the Budget has demonstrated the markets' belief and confidence in the course the Chancellor has charted in the year ahead. I commend the Bill to the House.

Mr. Roy Hattersley: On Budget day my right hon. Friend the Leader of the Opposition said that the Budget of 1986 would be remembered for two characteristics. The first was its irrelevance to the real problem facing this country, and the second was its divisiveness—the help it provided for the rich and its neglect of the least well off. Those two characteristics are reinforced and reproduced in the Finance Bill.
The Chancellor prudently pretends that items such as the niggardly increase in pensions and child benefit are none of his business. He deals with the other part of my right hon. Friend's criticisms by saying that the way in which the British economy has survived the fall in oil prices is a testimony to the fact that his management of the economy has been wise and prudent. He used the word "unscathed" from the fall in oil prices. He used it in the House on 18 March and to the Economic Club of New York on 11 April.
The Chief Secretary, who a moment ago led the cheers, was notably less ambitious, less buoyant and less bullish


about the claims he made over the way in which we have survived the reduction in the price of oil. That is not surprising, because since the Chancellor made his grandiloquent claims we have had the April balance of payments figures. Those figures are unique in their depressing quality. They show the folly of the Chancellor's boast that we could pass the reduction in oil prices without cost, and the folly of the policy which the Chancellor sought to justify. It is surprising, even allowing for the rules which from time to time constrain the Chief Secretary, that he did not deal with the principal criticism made of the Budget's application to the economy, the omissions which are, therefore, to be seen in the Finance Bill and the fact that nothing the Finance Bill does deals with the central issue of economic decline, which is that we are too dependent on oil and too vulnerable to changes in oil prices.

Mr. Neil Hamilton: Rubbish.

Mr. Hattersley: The hon. Gentleman must have been elsewhere when the balance of payments figures were produced last week. They denoted the facts of the economy once the oil price is not there to boost and reinforce our neglected, declining and deteriorating manufacturing industry. The Budget and the Finance Bill do very little to deal with those fundamental problems which we tried to draw to the Chancellor's attention six weeks ago. The Chief Secretary takes refuge in the one piece of good news—at which I rejoice and about which I wish to express my pleasure—which is the reduction in the base rate and the fall in mortgage rates which followed.

Mr. Nicholas Budgen: Will the right hon. Gentleman give way?

Mr. Hattersley: Not yet. I will tell the hon. Gentleman when.
The Chief Secretary told us the good news about the reduction in the base rate. I said during the Budget debate, and I repeat it today, that he obtained a cheer from Conservative Back-Bench Members because they are delighted that an intolerable interest rate has been reduced to an insupportable interest rate. We are still enduring and being burdened by the highest rate of interest in the OECD. The six-month Euro rate is as follows: in Denmark, 4·5 per cent.; in the United States, 6·75 per cent.; in France, 7·5 per cent.; and in the United Kingdom, 10 per cent. Those are the notional figures. If the figures for real interest are compared and calculated, the British interest rate is 2 per cent. higher than the average of our OECD competitors. The fact that there is rejoicing among Conservative Members that the figure should now be only 2 per cent. above the average rate shows how easily they are satisfied. It also shows that the excuses that we have heard for seven years about interest rates have worn thin and disappeared.

Mr. Budgen: rose—

Mr. John Butterfill: rose—

Mr. Hattersley: I shall let the hon. Gentlemen know when I am ready to give way.
Originally, we were told that interest rates would be brought down below those of our competitors because the Government would cut public expenditure. That did not work. We were told that our interest rates were high because of the rates in competitor countries, but now they

are higher than those rates. Sooner or later, the Government will get round to the idea that interest rates are too high because of the follies and failures of Government policy, and not least because the Government are keeping up the interest rate so that they can help to maintain sterling at an artificially high rate as an alternative to a monetary policy.

Mr. Budgen: I thought the right hon. Gentleman said that high oil prices were to the advantage of manufacturing industry. Will he explain that passage of his speech?

Mr. Hattersley: I explained that in my Budget speech, but I shall repeat it now. A reduction in oil prices would be to the benefit of an economy in which manufacturing industry was strong and ready to expand. I said that, thanks to the folly of the Government in allowing the collapse of manufacturing industry, we could not take advantage of a reduction in raw material costs which some of our more successful competitors will enjoy. Last week's balance of payments figures underline the wisdom of the Opposition's insistence that to rely on oil revenues as the Government have done is a disaster for Britain.
It is also a disaster for the Chancellor of the Exchequer, for it allows him to pin another medal on his chest. He can add the largest visible balance of payments deficit ever to the highest level of unemployment ever, to the highest real interest rates ever and to the lowest value of sterling ever, which he has contrived to ricochet up to a height which is so great that it penalises our manufacturing industry and cripples our exports. Yet the Chancellor remains incapable of even imagining that he might be wrong. He does not even acknowledge, far less attempt to resolve, the two great crises to which the Finance Bill should have directed the nation's attention. Those are the crises of unemployment and poverty. Instead of facing those issues direct, with each Finance Bill the Chancellor takes refuge in irrelevancies. This year, the chief irrelevancy was built around and hidden behind the slogan "people's capitalism". The diversion was intended to deflect attention from the Government's failures of personal equity plans in clause 37 and schedule 8.
I hope that when the Financial Secretary replies this evening he will have the grace to concede that personal equity plans help the small investor almost not at all. The small investor already benefits from the £6,300 threshold on capital gains tax.

Mr. John Maples: indicated assent.

Mr. Hattersley: I am delighted to receive endorsement from at least one Conservative Member.
The PEP provides little or no incentive for new share ownership. It offers a further tax privilege to existing share owners, many of whom are already very rich and most of whom will convert their existing holdings into PEP. Those two facts typify the Chancellor's record. It is a gimmick intended to obscure the Budget trivialities, and as well as providing a couple of days' headlines, it puts money in the pockets of the better-off.
I hope that the Financial Secretary will have the grace to concede that the Chancellor's schemes have several other built-in disincentives for the small and new shareholder. The investment must be made through authorised PEP managers, who will charge a fee and who have been open in saying—at least the City in general has been saying—that they are not prepared for them,


do not welcome them, cannot cope with them and do not want to manage the small investor's resolution. What is more, unit trusts will be excluded. Although PEP will help existing shareholders with a new form of tax exemption, the Chancellor's claim during the Budget debate that it will bring about a dramatic extension of share ownership in Britain is typically and patently the grandiloquent nonsense that we have heard from him from time to time.

Mr. Roger Freeman: The right hon. Gentleman criticises personal equity plans. Would he propose a more generous scheme for wider share ownership?

Mr. Hattersley: I was about to comment on exactly that point. To show the hon. Gentleman that he did not prompt me into that assertion, I shall read from my notes. I wish to make it clear that I support genuine extensions of share ownership schemes which enable and encourage employees to acquire stakes in their companies. The schemes that I want would carry voting rights proper to share ownership, and would be available to all company employees; they would not simply be another executive and top management bonus payment. The schemes I want would be made available in practice as well as in theory, because many of them will be financed by the share option schemes about which the hon. Member for Horsham (Sir P. Hordern) asked the Chief Secretary but obtained no reply. The funding of those schemes would allow real workers to make small and gradual investments. If the hon. Gentleman who asked the question has doubts about our intentions, let me assure him that we shall seek to amend clauses 21 and 25 in Committee to enable such an extension in genuine employee share ownership to be promulgated, propagated and encouraged.
The Committee will also discuss the proposal for tax relief on contributions to charities, which are obtained in clauses 26 to 31. They are in part the result of the Chancellor's desperate search for a sympathetic headline—[HON. MEMBERS: "Come on!"] Those Conservative Members who are moaning probably do not recall the pressure that my right hon. Friend the Leader of the Opposition put upon the Prime Minister and the Chancellor to provide some tax relief for the Band Aid initiatives, and their hard-hearted replies to our pleas. Only when a body of public opinion built up saying that the Government should be more helpful to charities did the Government decide that that was the popular thing to do.
I shall make the Opposition's view absolutely clear. We applaud the proposal to help genuine charities, but the description of charities is wholly inappropriate to some of the institutions which presently enjoy that legal status. I would like to help Oxfam and Save the Children Fund, but tax exemptions for Eton and Harrow are especially offensive at a time when public education is being starved of cash. The next Labour Government will certainly maintain the exemptions for charities, but a new definition of charities will be provided which will concentrate the help on those institutions which genuinely deserve it.
We will also reintroduce capital transfer tax. That tax is virtually abolished under clauses 70 to 86 except when it is applied as an inheritance tax. As the Chief Secretary to the Treasury must know, inheritance tax is now voluntary or an additional punishment for sudden death.

Anyone can avoid inheritance tax by following two rules. The first is to appoint a competent accountant and the second is not to die unexpectedly.
It is impossible—I was going to say difficult, but impossible is not too strong a word to use—to imagine a more arbitrary way of calculating the incidence of a tax; in practice that tax turns out to be another of the Chancellor's concessions to the rich and, often, the very rich. Already, the first £70,000 of estate duty is exempted from tax liability.
Before I discuss the subject which is clearly central to the Budget and the Bill, and the one on which the Chief Secretary naturally concentrated most of his speech—the subject of income tax—I would like to ask the Chief Secretary a question about a subject which I am astonished that he failed to mention. I wish to ask the Chief Secretary about the pension fund surplus. When the Financial Secretary replies, will he tell us why the Government have chosen 5 per cent. as the level of surplus at which the pension funds must arrange one of the three alternatives which the Government require—a contributions holiday, an increase in benefit, or a refund?
I understand, applaud and support the principle of discouraging excessive surpluses, but the figure of 5 per cent. is clearly arbitrary. It is the view of virtually every authority other than the Government—the Trades Union Congress, the Confederation of British Industry, the Institute of Actuaries and the National Association of Pension Funds—that 5 per cent. is too low and that 10 per cent. is a more likely figure. The Financial Secretary should tell us why the 5 per cent. level was hit upon when, in the view of all the authorities that I have referred to, there are considerable risks to the prospects for pension funds in these uncertain and fluctuating times.
The Chief Secretary said, and the Opposition agree, that the principal features of the Budget were the changes made in direct taxation—the £1 billion resulting from the penny off the standard rate of income tax. Before I offer my opinions on that, I want to remind the House of the pattern of tax changes which has occurred during the lifetime of the Government.
We all know that the gross annual tax bill has increased in real terms by almost £29 billion. The overall figures of increased taxes imposed by the Government, who had been elected twice to cut the tax bill, and the pattern of tax increases and their incidence upon the population was revealed in a parliamentary answer in Hansard on 27 March. The written reply on 27 March contained a calculation of income tax, national insurance contributions and child benefits as they apply to various groups within the population.
The figures show that individuals and families on half or two thirds average earnings now pay a larger proportion of their earnings in income tax than they did in 1979. All those who receive half or two thirds of average earnings are paying more, and in some cases dramatically more, of their income in taxes than they did seven years ago.
I am sure that the Chancellor's silent PPS would cry out, with the expertise that he must have achieved through his occasional calls at the Treasury, that they are paying more because their real earnings have increased. The lucky earners who are earning five or 10 times the national average are paying less because their real earnings have increased. The people earning 10 times the national average are paying 15 per cent. less of their earnings in tax than they paid when the Government were elected in 1979.
That confirms the simple phrase which must be engraved on the Government's heart and which is already understood outside the House, that the increase in taxes imposed by the Government has fallen on the poor and the middle-income groups rather than the rich and has produced the position which the Opposition prophesied. There has been a redistribution of income by taking money from the poor and giving it to the rich.

Mr. Maples: While the right hon. Gentleman is discussing the structure of income tax, and as he told us in a previous debate on these matters that he would plan to raise almost £3·5 billion from the so-called better-off, does he agree that the figure given by the Chief Secretary would involve an average tax rate of 70 per cent. on all income in excess of £18,500? If the right hon. Gentleman does not agree with that, what higher rate tax structure does he think would be necessary?

Mr. Hattersley: I have said time after time that the arbitrary and risible way in which the Chief Secretary deals with these matters, fools no one. The Chief Secretary plucks one tax out of the air. At one moment he decides upon 41 per cent. VAT and then he chooses 80 per cent. for income tax.
There are many ways in which the favoured 5 per cent. of the population have enjoyed tax privileges and concessions under this Government. Some of the taxes removed by the Government, like the unearned income surcharge, must be reimposed. However, the real assault on the privileges of the very rich does not concern their marginal rates but should affect their allowances. Most of the money should be raised from that area. That naturally and inevitably leads me to my next point. I understand why Conservative Members complain about, resent and say that they will resist the increases in taxes for the very rich. I hope that they will also understand—

Mr. Butterfill: Will the right hon. Gentleman give way?

Mr. Hattersley: I will not give way now.
I hope that Conservative Members will understand that the tax cuts which they have boasted about are not discrete options. The income which the Treasury has forgone as a result of tax cuts for the favoured income groups, could have been used for other purposes. To choose to cut taxes for one group is to choose to increase taxes or reduce benefits for another.
In relation to that equation and balance, I would like to ask the Financial Secretary to the Treasury several questions which I do not mean to be rhetorical and for which I require answers. How can he justify the balance that the Government have struck between their provision of benefits and welfare and their cuts in taxes for the very rich? How can they justify abandoning the unearned income surcharge when the pension is so low that old people die from the cold in winter? How can they justify abandoning the highest tax band when the long-term unemployed who are now so numerous—there are more now than the total of unemployment when the Government came to office—lose full unemployment benefit after a year? How can the Government justify abolishing capital gains tax when child benefit this year has increased by only 10p?
These are all compensatory factors—one cut in one area accommodates a failure to improve welfare and

benefits in another. The Financial Secretary and the Government, over the next few years, will have to demonstrate why their priorities lie, as they do, with the rich and why they hardly ever lie with the groups who in a civilised society ought to receive most assistance. The Chancellor and the Government have chosen to do very little about poverty and absolutely nothing about unemployment.
If the Chief Secretary contests that assertion, may I put to him again a question that I asked during the Budget debate but which nobody answered. The Chief Secretary seemed to be about to answer that question today, but in the end he shied away from it. Why was the £1 billion that the Chancellor said that he had at his disposal used to reduce the standard rate of income tax by 1p? The Chief Secretary said, "We did it because we had not done it before." That is an answer from "Alice in Wonderland". "We do it, because we do it, because we do it," said Tweedledum to Tweedledee. Why did he choose this option when other clearly preferable options were available to him? Why, particularly in the light of the Government's record, was the £1 billion not used directly to tackle unemployment?
I add a note about the Government's employment record, since the Chief Secretary chose rashly to boast about the number of jobs that have been created by this Government. I think he said, "We have created more jobs than the rest of the EEC, put together." That boast is substantiated only by this country having adopted a practice that has not been adopted in the rest of the European Economic Community: the practice of counting part-time jobs as though they were full-time jobs. What is undoubtedly true, according to honest statistics that are genuinely comparable between Britain and the rest of the EEC, is that now 1 million fewer people are employed in Great Britain than were employed in 1979 and that we have lost more jobs than the rest of the European Economic Community put together.

Mr. MacGregor: The right hon. Gentleman asks me a question about a main part of the Budget, the reduction in the basic rate of income tax. I gave several reasons for that reduction in my speech today and also during the Budget debate. If the right hon. Gentleman is so critical, why has he said that he will not oppose the reduction of 1 p in income tax?

Mr. Hattersley: I repeat gladly what I said in the Budget debate. The Opposition believe that the economy needs that boost. However, the Chancellor and the Chief Secretary had five possible ways in which to provide that boost. The question that I am asking, and which the Chief Secretary persists in not answering, is why, of the five possible ways, through which I propose to take the House, did he choose the one that helped unemployment and the poor least but helped the rich most?
I propose to remind the Chief Secretary of those five alternative ways. This afternoon he said virtually nothing about unemployment. People would not have believed it had they been warned in advance that during a 40-minute Second Reading speech on the Finance Bill, only two or three minutes would be devoted to unemployment. If the Chief Secretary had wanted by fiscal means, which is what this debate is about, by tax stimulus, which is also what this debate is about, and by methods that are legitimate to a Finance Bill, and therefore would have been within the


rules of order, to concentrate upon reducing unemployment, he could have used his £1 billion upon public sector capital investment and maintenance.
That would have been a quick, cheap and certain way to create jobs. It would have minimised the adverse effects on inflation and the balance of payments. It would have helped to meet the desperate need for new and improved houses, renovated hospitals and the replacement of decaying schools. All of that could have been done by using the £1 billion for that purpose, but still we have not received an answer as to why the Chief Secretary made the choice that he did.
If the Government and the Chief Secretary were remotely concerned about the low paid and the least well off, they could have used the £1 billion to increase child benefit and to concentrate help upon those areas where it is most needed. If the Chief Secretary and the Chancellor had found the compulsion to cut income tax to be overwhelming, because they had to do something to attempt to fulfil the promises that they have so flagrantly and blatantly broken since 1979, why did they choose the standard rate of income tax that helps the rich the most and the lowest paid the least? Why did they not introduce a reduced rate band? Why was there not an increase in the threshold?
The Government have attempted to answer none of those questions. Therefore I put it again to the Chief Secretary: of the five ways of spending the £1 billion that were canvassed before the Budget, why did he choose the one that helps the lowest paid the least and the unemployed not at all, but that delights the 1922 Committee?
Last year the Chancellor called his Budget a Budget for jobs. When measured against the Chancellor's criterion, it was a catastrophic failure. Unemployment has risen by 100,000 since the Chancellor gave that title to his Budget. This year we have had a Budget for the Tory party. That, too, will fail in its objective because the Government's unpopularity has increased since the Budget announcements.
The manipulation that was supposed to do so much for flagging morale on the Government Back Benches and for declining status in the opinion polls has failed for two reasons. First, the general public have higher standards than the Government realise. The voters, if not the Tory party, are concerned about the Health Service, the education system, pensions and, above all, the unemployed. They have contempt for a Government who ask the prosperous members of society to forget or to neglect their least well-off neighbours and simply to rejoice in their own 1p in the pound tax cuts.
The general public, if not the Tory party, also realises that we all have a direct vested interest in financing housing—where again there will soon be a shortage of 1 million dwellings—in financing the additional cost of adequate law andd order and in financing an improved road system and rail network.
The British public is a great deal less gullible than the Chancellor of the Exchequer and the Cabinet believe. It knows that the Government's tax policy has virtually nothing to do with the needs of the economy, the unemployment crisis, the collapse of manufacturing industry and the increasing number of families who are living below the established poverty line but that it has everything to do with the Government's disarray and the

Tory party's disintegration. The Government's economic horizon stretches no further than the next general election. They will lose it, because the British people are a great deal more moral, practical and decent than the Chancellor will ever understand.

Several Hon. Members: rose—

Mr. Deputy Speaker: Order. A large number of right hon. and hon. Members are seeking to take part in the debate. Mr. Speaker has asked me to say that he wishes preference to be given to those hon. Members who unsuccessfully sought to take part in the Budget debate. The whole House will appreciate brief speeches from Privy Councillors and other hon. Members.

Mr. David Howell: First, may I raise with you, Mr. Deputy Speaker, a point of order. It arises out of your earlier comments about what is in order in this debate. Will you confirm that it will be in order for us to discuss the contents of the Fourth Report of the Treasury and Civil Service Committee on the Budget that is on the Order Paper for discussion today? It touches upon subjects that go slightly wider than the contents of the Finance Bill, although they are directly relevant to the conext in which the Finance Bill is cast.

Mr. Deputy Speaker: The Chair will allow that, but it is important to bear in mind that earlier I chided the Chief Secretary for, as I put it, seeming to invite the House to discuss specific employment matters. That would be stretching a little too much the limits of the debate.

Mr. Howell: I am grateful for your ruling, Mr. Deputy Speaker.
The House will not wish to be detained for too long by the featherweight comments that we have just heard from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), which seem to be curiously unrelated to the economic issues, the economic changes and the remarkable successes that are beginning to develop in the economy, especially the apparently virtuous spiral of downward inflation and interest rates and the rising investment and confidence in the British economy.
I agree with my right hon. Friend the Chief Secretary to the Treasury that this Budget was ingenious and full of a number of extremely lively and important proposals. I should like to comment on a few of them before turning to some broader points about the Finance Bill.
I welcome enormously the heavy emphasis that has been placed on wider ownership and what has been called popular capitalism. This is a vital thrust and a major part of miniaturising capitalism in line with the fragmentation and miniaturising of the labour market and the industrial structure. I greatly welcome that emphasis. As to the proposal for personal equity plans, this is very interesting, but I believe that more work on this scheme will be needed. My right hon. Friend the Chief Secretary to the Treasury told us that regulations will be introduced.
The present difficulty is perfectly straightforward. As my right hon. Friend the Chancellor said, it may be right for the small investor who puts money into individual shares not to go near the tax inspector, but the manager of an investment must approach the company concerned or the Revenue to claim back the tax on the dividend. He will incur a cost. He will have to charge that cost—he cannot live on air—and that will fall on the PEP


investor. The charge may be as large as any tax saving that the PEP investor makes from putting his money in a PEP scheme.
If the PEP scheme is confined to individual share investments, I am not that sure that it will run. It will be necessary to consider arrangements through which personal equity plans can be married up with perhaps a new PEP trust so that the cost of claiming tax on all the dividends from the companies that pay dividends on the shares in which investments have been made can be handled in volume and minimised. If that is not done, I do not believe that the scheme will be enormously attractive to the small investor with a capital gains tax exemption of about £6,000.
If it is intended to drive forward the spread of ownership, which has moved a long way already—my right hon. Friends have that intention very much in mind— some modifications to the scheme may have to be produced. The Government should have taken their courage in both hands and gone for a tax-free entry saving scheme—something like the French Loi Monory scheme—which would allow millions of workers to put part of their salary into investments and shares and claim back all the tax. The inducement of a tax-free investment is powerful.
It will be argued that such a scheme will be costly. If my right hon. and hon. Friends had looked at the scheme which was introduced by Lord Vinson and Mr. Philip Chapell of the Centre for Policy Studies, they would have seen a proposal on the same lines as Loi Monory. In theory, the cost would have been about £1 billion a year. In dynamic terms, it would have been considerably less.
If pressed, I am not sure whether I would have said to my hon. Friends that, although I would be the first to urge that we go for the 25 per cent. tax rate, which I think we will achieve before the end of this Parliament—that was the figure that we had in mind long before 1979—this year there may be a case for diverting the funds into a dramatic push on the wider ownership and personal savings side of such schemes. I am slightly sorry that the Government have not shown enthusiasm for going down that route. I hope that they will, that the PEP scheme will be the first toe in the water and that we will now consider more dramatic tax-free schemes.
The revenue calculations behind the Finance Bill and the Budget are based on the assumption that the oil price will be about $15 a barrel in 1986–87. That is optimistic. The price is already $12 a barrel, and it is highly likely that it will fall further. There are no underlying reasons why it should not go lower, as long as the Saudis maintain their output at present levels, as they have every intention of doing, and as long as demand stays low, which I think is likely because there has been a fundamental change in the world's need and thirst for oil.
Many energy experts reassuringly say, "Do not worry. The price of oil will go up and that will make the Budget arithmetic straight. It will also take the heat off the coal industry, the oil industry, and so on." One should regard those predictions with some caution. There may be another oil shock before 1992, although perhaps the expectation will avoid the very thing that people fear. In the meantime, oil prices could remain at low levels for several years.
If the average oil price is $10 or $11 a barrel in 1986–87, we will have to revise our expectations for next year. If, in 1987–88, the price runs at $10 or even lower, which is not impossible, my right hon. Friends will have

to ask themselves how their long-postponed, but very important, strategy for cutting personal taxes—I remain convinced that that is the best way to create jobs, because the experience of every nation has been that low taxes and low unemployment go together—will be sustained if the Government have to suffer a further cut in oil revenues.
My right hon. Friend the Chancellor made an interesting speech to the Lombard Association. It was, as it were, part of the Budget speech which he felt should be made elsewhere, not in the Budget speech. The report of the Select Committee on the Treasury and Civil Service commented on that.
My right hon. Friend said, rather quaintly, that the fall in oil prices was the result of a return to prudent monetary policies and that that had been responsible for the oil price collapse. With respect to my right hon. Friend, I do not think that is the position. First, it is highly questionable whether we have returned to prudent monetary policies. Secondly, I believe that the fall in the consumption of oil has occurred because the demand for oil has become detached from the process of output growth in the Western economies.
Sheikh Yamani, whom I greatly respect, is incorrect when he forecasts that, after a while, the West will return to gas-guzzlers and oil heating on a massive scale, that there will be a general switch-around and that demand will rise as supply falls. The truth is that the world has gone off oil. The Budget calculations and the Finance Bill have to be cast on the assumption that oil revenues are not only substantially lower now than they were last November, when there was much heady talk about tax cuts worth £3·5 billion, but are lower than they were expected to be a few weeks ago, and will remain lower. The arithmetic will have to be recast on that basis.
It is not just a matter of losing tax revenues. New downside problems emerge and those are directly relevant to the tax regime and the Finance Bill. We have seen the first signs of alarm and concern over the future of the coal industry which, as far as its planners are concerned, is in a state of total paralysis. If the price of oil were to remain at $15 a barrel—let alone the present price or the price to which it will fall shortly—there would have to be a total revision of all the coal industry's plans, which would make everything about which Arthur Scargill went to war look like peanuts. Those are the serious industrial realities behind the falling oil price.
My right hon. and learned Friend the Member for Dover (Mr. Rees), who is a leading authority on oil industry taxation, both inside and outside Government, reminded us that the oil industry was looking at an entirely different landscape. There have been reports that a major loss of jobs is in prospect in Scotland as a result of the collapse of the demand for offshore equipment. It has been mentioned that 6,000 jobs are at risk. If the recoverable reserves in the North sea are to be reduced substantially, as is estimated now, as a result of the price of oil settling down at about $10 a barrel, it will re-jig the role that the North sea programme has played in the British economy. That may be inevitable.
It is possible that it will give Britain an opportunity to adjust to being a more normal industrial consumer economy than has been the case in recent years. The reality that my right hon. Friends will want to face, and which they must face, is that the changes in the energy economy, which I have described, will involve a further substantial loss of jobs, whereas the changes in the non-energy


economy, which can take on board lower-cost energy and expand with new technology, will probably not involve many new jobs. Jobless growth is a worldwide phenomenon. I do not see that Britain will be free of it. We must look ahead. Further moves of a direct kind to assist the problem concerning jobs will have to be contemplated by my right hon. Friends. I am sure that they have some plans.
Tax cuts are the best way of getting new jobs, but there is probably now no escaping some more direct measures of the type I hoped would appear in the Budget and the Finance Bill. I was interested to see the suggestions from the Department of the Environment and departments of housing that the time was approaching when some local authority capital receipts could be released. An article in the Financial Times suggested that the Government were considering that measure. That would be a sensible move.
I have a partial liking for some of the measures to which my right hon. Friend the Member for Henley (Mr. Heseltine) referred when visiting some inner-city areas which are derelict and miserable. The association that some people make between inner-city infrastructure investment and unemployment is cruelly misleading. Not many jobs will be turned on in that way. But the association which needs to be made between grim surroundings and investment is much more valid. What my right hon. Friend the Member for Henley tells my right hon. Friend the Chancellor is that the time has come not for massive handouts of public funds but for a type of seedcorn—a pump-priming operation whereby small amounts of public money bring large amounts of private investment on their back. I urge my right hon. and hon. Friends to consider that course as they monitor the development of their Budget strategy once the Finance Bill is passed.
I hope, Mr. Deputy Speaker, that you will allow me to refer to monetary policy because the report of the Select Committee on the Treasury and Civil Service looked at it in some detail and because my right hon. Friend the Chancellor made an extremely interesting speech on monetary affairs outside the House in what was an annex, as it were, to the Budget speech. I have already mentioned the speech he made to the Lombard Association. He clearly signified that we were saying goodbye to technical scientific monetarism. I am glad to be associated with that goodbye—I was going to say "au revoir", but I hope that it is a permanent goodbye.
My right hon. Friend has made it clear, as has the Select Committee on the Treasury and Civil Service with its usual lucidity, under the guidance of my right hon. Friend the Member for Worthing (Mr. Higgins) with his usual lucidity, that our policy is to use short-term interest rates and the firm exchange rate to act as the main curbs on inflation. It is even questionable whether they will be operated through the mechanism of money supply to curb inflation.
My right hon. Friend the Chancellor in his speech to the Lombard Association said that sterling M3 had gone on an indefinite furlough. It is no longer considered to be a suitable measure. My right hon. Friend referred to its changed velocity, and so on. He also made it clear that the MO position had been reasserted. But it has been reasserted not as a governor of the rate of inflation—something to be influenced which will, in turn, influence

inflation—but as an indicator, similar to a dial on a clock. If the dial points too high, short-term interest rates, presumably, will be used directly to curb inflation by curbing credit and other deflationary factors. In short, our policy is to use short-term interest rates and the exchange rate.
What is our exchange rate policy? I am sure that my right hon. Friends will want to address themselves to the difficulty that arises. The impression outside the House is that our exchange rate policy is in mid-air. We are in the European monetary system as a country member but are not involved in the exchange rate mechanism. Will we become involved in it, or will we not? There seems to be some contradictions.
My right hon. Friend the Chancellor has been extremely firm and clear about where we are going with respect to exchange rates. In his speech to the Lombard Association he said:
in the right circumstances membership of a formal or fixed exchange rate system can itself provide a very effective framework for monetary policy".
He said:
over the medium term maintaining a fixed exchange rate against countries who share our resolve to reduce inflation is a pretty robust way of keeping domestic monetary policy on the rails".
My right hon. Friend continued:
I see no role for an exchange rate target outside a formal exchange rate system … And that, for the UK, means outside the exchange rate mechanism of the EMS".
He said:
it clearly makes sense … to limit wild swings in the exchange rate, particularly against our European competitors".
In spirit and in intention we seem to have moved into the exchange rate mechanism of the EMS and, if so, we have an exchange rate policy. That needs confirmation.
Having made those comments on short-term interest rates and the exchange rate, which seem to be the main two engines of our policy, I must say, a little perversely, that it probably does not matter much whether the policies are being modified. I suspect that the real issue is rapidly ceasing to be inflation and is becoming deflation. I was interested to see this morning in The Times that Mr. Timothy Congdon had changed his tune remarkably and was questioning whether Governments had gone on too long wringing their hands about inflation when, perhaps, the wind had changed. Inflation in Germany is 0·1 per cent. Inflation in Japan is negative and prices are falling. Since 1 January, commodity futures prices in the Western world have fallen 10 per cent. and, since 1979, non-oil raw material prices have fallen by well over 20 per cent. in real terms, according to the Bank of England Quarterly Bulletin.
With prices falling in on all sides, the problem will be how to keep world economies going. I doubt that domestic monetary policy will play much of a role. Nor, as Mr. Congdon apparently thinks, will it be much more than pulling a piece of string to urge more and more interest rate disarmament in the hope that somehow it will keep the economies going. The reality is that probably nothing can be done. If anything can be done, it must be on an international level, not by individual Governments. I imagine that that matter will be discussed at the end of the week in Tokyo among all the talk of global medium-term financial strategies and objective indicators.

Mr. Budgen: Will my right hon. Friend give way?

Mr. Howell: If my hon. Friend will allow me, I shall come to the end of my remarks, because I have delayed the House too long.
I do not know whether the Tokyo conference will have the slightest effect on the scene. I suspect that Ministers are beginning to stand around at these international gatherings saying, "After all, boys, we are all Keynesians." That seems to be the new mood. I suspect that the reality will be more modest. The outcome will simply be that the Japanese need to become more globally minded in using their colossal surplus and buy more Mexican bonds, or whatever will help the balance of the world economy, and that the United States will cut its vast deficit. If those two measures are achieved, I believe that there will be more world stability and a better background against which we can proceed with interesting tax reforms in the Budget. I am sure that my right hon. and hon. Friends are aware of these rocks ahead as they steer their way through the Bill.

Mr. Robert Sheldon: I shall refer to some of the points raised by the right hon. Member for Guildford (Mr. Howell), especially oil prices and monetarism.
One of the pleasures of speaking on the Second Reading of the Finance Bill is that one does not necessarily have to join the chain gang on the Finance Bill Committee. I suppose that some of us have either been granted parole or even full remission of sentence.
I should like to refer to an omission from the Bill. One of the pleasures of being a Back Bencher is that one does not have to agree with everything said by one's party. [Interruption.] That will not give much pleasure to the Government. I am concerned, as I am sure is the Chancellor, about the way in which mortgage interest relief is getting out of hand. Two years ago, the cost of mortgage interest relief was £2·15 billion and, in 1984–85, two years later, it was £3·5 billion—a 60 per cent. rise. That is bad enough because, clearly, it will continue. It distorts the housing market and directly adds to the cost of housing, but there are further problems.
There is an increasing sophistication among borrowers. The Government have done much to forment that, with advantage, and I am not against that. That sophistication means that there will be a greater leakage of money, ostensibly for the purpose of housing, going into other areas. Many people have a second holiday on the basis of an extension to an outhouse. Such leaks will continue and the cost of mortgage relief will increase again and again. What are the effects of these expensive subsidies to expensive houses? At one end, it encourages over-housing and at the other end taxpayers living in rotting, decaying and cheap accommodation are subsidising the relief. These opposing positions are getting further and further apart and it is a matter of concern.
The right hon. Member for Guildford (Mr. Howell) raised the important subject of the price of oil and the consequence of the fall in price. That ties in with the fourth report of the Treasury and Civil Service Committee. Once again we are extremely grateful to the right hon. Member for Worthing (Mr. Higgins) and his Committee for producing the report. In paragraph 41 of the report refers to
the nature and the lack of a satisfactory explanation by the Government of its response to the oil revenue.

The report calls it a "disappointing response", and I agree with that.
The high price of any commodity benefits the producer against the purchaser. However, the total world purchasing power remains the same. It is the distribution which varies. The benefit to countries which import oil is exactly balanced by the disadvantage to those which export oil. The transitional effects are difficult and cause problems. If there is a sudden rise in the price, time is needed for the market to settle down. The OPEC increases in 1974–75 could have been absorbed if those price increases had taken place over a longer period. An oil price shock causes imbalances.
We should have used our oil revenue to increase our growth and investment instead of waiting for the price to fall. If Britain had no oil, our domestic costs would benefit from the lower oil prices. France, Germany and Japan have benefited greatly from the fall in price. Our exports would benefit if our major customers were oil importers and they would suffer if our major customers were oil exporters. We are in a different position because we have oil which we export. At one time our domestic costs benefited in the same way as the non-oil producing countries are benefiting now.
Britain could have reaped the benefits of the profits from North sea oil revenue if we had used it to assist industry. The non-oil industrial countries were unable to do that and Britain had a commercial advantage which we have never used. In a competitive world, it is the oil importer countries, our industrial competitors, that now have the advantage. We have forgone that prime advantage as the rich rewards of North sea oil have been used as an excuse for a high pound, with its debilitating effect on our industry and employment figures. The right hon. Member for Guildford was correct when he said that the oil price would have a consequence on the coal industry.
Britain's advantage lay in talking sensibly with the OPEC countries. A rational sensible oil price should have concerned Britain. It was not of interest to Germany, Japan or France. We forgot our personal involvement in a matter which should have had high priority.
The PSBR is held to be the right one because so much will be obtained from the sale of publicly owned assets. The exchange of a public monopoly for a private monopoly causes us grave disquiet. There are laws in Britain which enable the courts to take action in a way which the Government may not find thoroughly acceptable. However, there is a short history of regulation for the private monopolies. British Telecom regards itself as not having a public interest with regard to 999 calls but that was held to be of public interest before privatisation.
These new super-monopolies require special controls which we do not have and which we are not even thinking of providing. We have only to look at the United States to see the way in which its corporations can circumvent the tight controls. I compare that with our thin, undernourished quangos fighting it out in the jungle with some of the largest industrial corporations. We have discarded ministerial supervision but the replacement is quite inadequate and the public will suffer. The Government should bear in mind that tax cuts would come from the sale of public companies which will then lack adequate supervision as private companies.
One of the most important measures in the Finance Bill concerns the capital transfer tax. It is serious because it


illustrates the philosophy of the Government. The Government claim to be radical, but nobody can conceive of returning to something less than the old death duties as a consequence of radical government. What is given is assistance to the idle heirs of those who have been responsible for Britain's misfortunes. I can understand the notion of rewarding those who create wealth. One can give financial inducements to those who create wealth and such inducements have not been considered by the Government. One can make out a case for rewarding the creators of wealth, although I would dispute it.
The emasculation of the capital transfer tax by the 10-year rule and the less onerous death duty provisions have made it a voluntary tax. It is a shameful proposal. The Chancellor of the Exchequer has replaced a useful tax with a voluntary contribution paid only by the miser, the procrastinator or the negligent.
The principles of the capital transfer tax were sensible and equitable. The enjoyment of capital which an individual creates is the right of that individual. However, the enjoyment of capital by virtue of birth has long been regarded as eminently suitable for taxation—a tax which ought to be high and enforceable. That was the basis of death duties long before Socialist Governments involved themselves in these matters. The approach was to make the loopholes smaller. That was undertaken by Labour Governments but has not been undertaken by Conservative Governments, and the result has been a division between the two sides of the House as to how far capital wealth ought to be taxed.
We are all agreed that income tax should be paid, and it should be progressive. We argue about the amount but not the principle. However, with regard to capital transfer tax and a tax on wealth, we argue about the principle. That is a great pity. There is no question but that wealth should be taxed. But we are now back to the old optional tax in an even worse form than before.
I do not know what is the Government's policy towards mergers. There are even many Conservative Members who, like me, had hoped that there would be some form of taxation that would have some effect. However, I do not know how far that is practicable. In the rising stock market, those who have exchanged the long view for immediate profits can see their share prices sharply improve, and can use them as the base for a takeover which may make no industrial sense and which any Government should be concerned with. The Government seem to say that we should forget the industrial logic and concentrate on the one aspect of competition between companies. But the trouble with limiting takeovers to mergers that do not reduce competition is that it encourages the growth of conglomerates.
I thought that the one lesson that we had learnt in all our years of industrial policy and of changes of view was that no firm has such managerial wisdom and expertise that it can rejuvenate and advance any industry that it turns to. I know that many captains of industry are confident of their prowess and that of their managers, and think that there is no firm where they cannot improve the structure or organisation. But we should have a healthy scepticism of such individuals or companies. At a time of a booming stock market, it is wise to call a halt to the fever of mergers and to calm down those frantic companies by introducing a long period of delay and reflection.

Mr. Maples: I think that the extent of recent takeovers and mergers concerns us all. However, the threat of a takeover is just about the only weapon to be held over the head of an inefficient manager of a large public company. If it was removed, assets would be even more inefficiently managed.

Mr. Sheldon: I think that that is true when activity on the stock market is fairly quiescent. However, when the stock market booms, a company that has fashionable shares can make a takeover bid for those companies that are not quite so fashionable. During the period of stability the system works reasonably, but during the period of instability it does not. We are in a period of instability, and it is difficult to justify those mergers. In five years' time, I am not sure how many of them will be vindicated.
The Treasury and Civil Service Committee has once again done us a very good service in drawing our attention to the issue of the money supply. The Chancellor of the Exchequer was insultingly dismissive in his Budget speech about his changes backwards and forwards over the question of money supply. It is useful to turn to the first statement of that medium-term financial strategy. I have a copy of the relevant Budget report, which I treasure as there are not many of them around.
When the concept of the money supply was introduced, there were great hopes and expectations. It was to be the foundations of all prosperity for ever and ever. We know that the Chancellor of the Exchequer wrote the words that I am about to quote even though, at the time, he was the Financial Secretary to the Treasury.
He wrote:
The Government's objectives in the medium term are to bring down the rate of inflation and to create conditions for sustainable growth, output and employment. To reduce inflation it will progressively reduce the growth of the money stock and will pursue the policies necessary to achieve that aim.
There is then the wonderful table, with sterling M3 scheduled to reduce from 11 per cent. in 1981, 10 per cent. in 1982, 9 per cent. in 1983 and between 4 and 8 per cent. in 1983–84. The Treasury was so certain about it that it allowed VAT to be increased to 15 per cent. It thought that there would be no effect on inflation because the money supply would do it all. The Chancellor of the Exchequer made a shambles of a speech. He has many ways of estimating the money supply, yet that concept is no longer in use. The last thing that I would advise someone who wanted to know what the Chancellor proposed to do would be to look at the money supply.
The right hon. Member for Guildford was right. There is an interaction between the exchange rate and the interest rate. If the exchange rate seems to be doing badly, up go interest rates. If the exchange rate is doing reasonably well in the Chancellor's eyes, interest rates can fall. The exchange rate is the prime determinant, just as it has been in Britain for the past 20 or 30 years. That little affair with monetarism lasted a few short years and then passed like a thief in the night. We now see the exchange rate mechanism working.
The right hon. Member for Guildford wanted Britain to join the exchange rate mechanism. I am not so sure about that. In the European monetary system we have, in effect, a deutschmark zone. We should not fool ourselves; that is what it is. Thus we either go into a deutschmark zone, or we have the deutschmark and sterling. Having two important currencies in the same zone is not the same as having one dominant currency. That is one problem.


Another problem is that we are likely to go in at far too high a rate. I believe that that is a serious point, although the Government may not see it as such.
The right hon. Member for Guildford also pointed out that the immediate danger was not inflation but deflation. That danger is serious. The right hon. Gentleman referred to the wind of change. We have spent too much time giving inflation super-priority. Nobody would doubt that there was a need to reduce inflation, but a change must now come. The danger is that it may come too late. We have suffered greatly from the Government's monetarist policies, and it is time that the agony was ended.

Mr. Michael Grylls: The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is a much respected Member of Parliament. Although I might have been tempted to agree with some of his comments on competition policy, I was rather less tempted to agree with his remarks on capital transfer tax. Nearly 2 million people run their own independent small businesses, and they may react adversely to his sideswipe at people's idle heirs and at his comment that they were a good reason for having an effective and tough capital transfer tax.
I believe that the change made represents a central and long-term part of the Budget, which will encourage independent businesses. If it is impossible to pass on a business intact to the next generation of owners or managers, that unit of competition will go. Moreover, why should we encourage people to start firms if they must be sold on their death or retirement? I warmly congratulate the Government on abolishing capital transfer tax, to all intents and purposes, on lifetime gifts.
I listened to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and found it sad that he seemed to have learnt or understood nothing about independent businesses. Most, if not all, do not reach their optimum size in one generation. They need to be passed from one generation to another, and to grow at every stage. Thus it is vital that our tax policy should facilitate that.
The passing on of productive assets from one generation to the next is crucial if a free enterprise system is to work effectively, and it is in this area that two thirds of new jobs are currently being produced. I hope that in a purely party political sense people in independent businesses will pay careful attention to what the Opposition have said about their determination, if they are ever entrusted with power again, to reintroduce a swingeing capital transfer tax. I hope that will be noted by everyone.
I want to move away from that subject and speak about a matter that was debated nearly a year ago, that of unitary tax. The House will remember that we had a major debate on that last year. The issue is of great importance not only to the United Kingdom but to the United States and to our main trading partners. The House will remember the debate on Report stage of last year's Finance Bill. It is important that as we debate this year's Finance Bill we should recall that debate. Perhaps during the summer the House will want to encourage the Government to take further retaliatory action to keep up the pressure on the United States Administration.
Last year the House unanimously passed a new clause which is now section 54 of the Finance Act 1985. That gives the Government power by order to withdraw payments of tax credits attached to certain dividends

received by companies with a presence in a unitary tax state such as California. I know that many of my hon. Friends carefully follow this issue in the United States and there is no doubt that the passing last year of the retaliatory provision was a milestone that has inspired action in Washington.
On 8 November 1985 President Reagan issued a presidential statement in which he said that his Administration would introduce legislation to abolish unitary tax on a worldwide reporting basis. Secondly, he said that he would enter into negotiations with the United Kingdom to try to amend the United Kingdom-United States tax treaty and try to ensure that when court cases occurred in the United States US interests were represented. In response to the American Administration's initiative our Government also issued a statement. They welcomed the Administration's proposed action and announced that the Government intended to enter into negotiations also to amend the United Kingdom-United States tax convention.
In recognition of the statement issued by President Reagan, our Government announced that they would forbear from initiating retaliatory action under section 54 of the Finance Act 1985 on the strict understanding that the United States legislation—this is an important point for the House to recall—will be passed into law and will take effect by 31 December 1986.
The United States Administration introduced their legislation into Congress last December but, alas, I have to say that it received what at best can only be described as lukewarm Congressional support. Indeed, the legislation did not have as many sponsors as many of us hoped it would have. I understand there was to be a subcommittee hearing in the Senate on 16 May but that intiitial hearing has been cancelled. We are now at the end of April and no further action has been taken in terms of a Bill being heard by the two key Congressional Committees, the Finance Committee in the Senate and the Ways and Means Committee in the House of Representatives. Little progress seems to have been made on the treaty route. The House may want to press the US Administration today and on every other occasion we can to give much more vigorous support to legislation in Congress than they have to date. I hope the Government will pay attention to that comment.

Mr. Ian Wrigglesworth: I support what the hon. Gentleman says. Many of us on this side of the House would support the Government if they took that sort of action.

Mr. Grylls: I am grateful for that comment. It is helpful to know that the House is united on this issue. Hon. Members may not be united on many issues but we are united on this one. It is worth mentioning that the early-day motion on the Order Paper on the subject has the support of 240 right hon. and hon. Members from all parties. I hope that my right hon. Friends the Prime Minister and the Chancellor of the Exchequer will take the opportunity at next week's economic summit to tell President Reagan and Treasury Secretary Baker yet again that this House is frustrated at the lack of progress on this issue in the United States, despite all the promises that we continue to receive.
All-party support is important. In that context, I am grateful to the hon. Members for Sedgefield (Mr. Blair)


for Stockton, South (Mr. Wrigglesworth) and for Roxburgh and Berwickshire (Mr. Kirkwood) and to my right hon. Friend the Financial Secretary who has given untiring support to this issue even though he has many other things to deal with. It is crucial that the Government continue to give that tough support. It is essential to pay tribute to those British companies that have major investments in the United States and that have launched a campaign to fight this issue. That is vital. Although to an extent it is self-interest, there is nothing wrong with that. Those companies are determined to see an end to this damaging tax.
When he is winding up, my right hon. Friend the Financial Secretary will encourage all hon. Members and British industry which holds United States investments if he confirms that the Government's deadline for action in the United States is still 31 December 1986. If it is not passed into legislation in the United States by that date, perhaps he will confirm that the Government will return to section 54 of the Finance Act 1985 and the retaliatory clause and do something to bring tougher pressure on the United States Administration.

Mr. Ian Wrigglesworth: I am pleased to follow the hon. Member for Surrey, North-West (Mr. Grylls) and reiterate the point that he speaks for hon. Members of all parties in expressing the frustration that we have felt for many years about unitary taxation. I hope that people in Congress especially but also in the United States Administration will take note of the fact that the whole House is united in its frustration.
Our central criticism of the Budget and of the Finance Bill was that the strategy which the Government embarked upon amounted to giving away by a reduction in taxation some £1 billion while spending only some £100 million on efforts to create jobs. That is quite the wrong strategy, and it was for that reason that I and my hon. Friends voted against the cut in income tax from 30p to 29p. We did that because we had the courage of our convictions and followed the strategy that we outlined in our own Budget proposals. That strongly contradicts the strategy that the Government have embarked upon.
It is deplorable that the Labour party did not have the courage of its convictions. Despite the protestations by Labour Members in this debate that they disagree with the Government strategy, they did not follow their voices by their votes and vote against the strategy when they had an opportunity to do so.

Mr. Robert Sheldon: Let me defend the members of the Opposition Front Bench. There was, of course, the factor that a tax cut increases demand in the economy and that is of value. Iain Macleod used to say that one does not turn away Father Christmas because he is not giving exactly what is wanted.

Mr. Wrigglesworth: I am disappointed by the right hon. Gentleman. He gives as inadequate an explanation of the lack of courage on the Labour Benches as his own Front Bench spokesmen have done. We criticise not the Labour party for wanting to expand the economy, but the method by which the Government have chosen to give away the money. As the right hon. Gentleman knows, that money could have been spent as his right hon. Friends and

we have been advocating for many years—for example, on expanding the economy through spending on infrastructure and housing.

Mr. Jeremy Hanley: rose—

Mr. Wrigglesworth: I do not want to pursue this point throughout my speech, but that is where the money should have gone, which is why we opposed the Budget's central strategy. The Labour party was not prepared to do that because it wants to have it all ways. It was not prepared to be consistent in its strategy.
The Chief Secretary painted, just as the Chancellor of the Exchequer and other Government spokesmen have done, a rosy view of the economy's performance. He provided a posse of selected statistics to demonstrate the success which, we are told, the Government's policies are achieving. Not surprisingly, the statistics which have been chosen are based on the economy's recovery from the depths of the recession in 1981.
We hear little these days about what happened to the British economy and British industry between 1979, when the Government came to office, and 1981. Obviously the reason for that is that during that period large sections of our industry were decimated and unemployment increased dramatically. It is like a person who wilfully and pigheadedly risks his health, and, having suffered from the inevitable consequences, expects congratulations on his recovery from his self-inflicted injury.
If one considers the record of the past seven years, not merely the period since 1981, one sees that employment—we have heard a great deal about the number of jobs that have been created recently—is still 1 million below what it was when the Government came to office in 1979. Indeed, that decrease is greater than that of the European Community as a whole. Output is only 7 per cent. above the 1979 level, manufacturing output is still 6 per cent. below the 1979 level, and manufacturing investment is more than 20 per cent. below the 1979 level. That is not a record to crow about. The empty or demolished factories and the 3·5 million unemployed are testimony to that record.
The Chancellor boasts that recently we have moved from the bottom to the top of the European growth league. However, if allowance is made for the effects of the miners' dispute, the 1985 rate of growth was 2·5 per cent. and only just ahead of Germany and Italy, and in the second half of 1985 the United Kingdom, with 2·1 per cent. growth, dropped well below France, Italy and West Germany. During that period West German growth was at 6·3 per cent. Therefore, the real record is dreadful. The most recent figures show a distinct slowing down in the United Kingdom economy, with manufacturing output stagnant during the past nine months and industrial production slowing down.
The Chancellor claims that we have survived unscathed the halving of the oil price. We heard a great deal about that at the time of the Budget. I wonder whether the Government have studied the Bank of England Quarterly Bulletin which points out that real national disposable income will be adversely effected by the impact of falling oil prices on the terms of trade. The Bank's analysis shows that the direct consequence of the recent fall in price is to reduce net disposable income by 1 per cent., since real net oil exports account for 2·75 per cent. of gross domestic


product. According to the Bank of England, that accounts for a direct loss to the balance of payments of up to £3 billion a year, at probable 1986 levels of production.
The bank suggests that that could be offset within four years by a 9 per cent. fall in the effective exchange rate. But it adds the crucial qualification that the improvement on the non-oil current account will follow from the beneficial effects of improved competitiveness, which depends on there being no offset to the effects of exchange rate depreciation from higher wage settlements. If rising unit labour costs continue to erode competitiveness, the effect on the balance of payments will be even worse than the £2·5 billion, £1·5 billion and £500 million predicted for 1986, 1987 and 1988 respectively by the Bank's simulations.
Thus, to grasp the opportunity presented by lower oil prices depends on conserving the competitive advantage conferred by lower exchange rate. In that context, it is crucial that wage bargainers recognise that foreign competitors also gain from lower oil prices, which have fallen even further in foreign currencies, and will reduce their pay settlements in line with their falling, if not vanishing, inflation rates.
The Chancellor is clearly prepared to stoke up a consumer boom with real disposable incomes rising by 5 per cent. and consumer spending by 4 per cent. this year. This year demand will be largely fuelled by consumer spending rather than by investment and export. Unit labour costs rose by 5·75 per cent. last year—much faster than those of our competitors. Their unit labour costs rose hardly at all or are falling. It is clear that the Chancellor must seek a bigger decrease in pay settlements than 1 per cent., which is the most that he can expect as bargainers adjust their expectations to falling inflation.
As commodity prices fall and work their way through the economy, wage pressure will start to increase inflation. Much of the credit which the Government have claimed for low rates of inflation and of interest should be put at the door of Sheikh Yamani for his action and of the lower commodity prices throughout the world. The Chancellor will hope to hold the rate of inflation to about 3 per cent. next summer with lower nationalised industry prices and indexation.
The Secretary of State for Employment, after announcing the appalling unemployment figures last month, shared in the general euphoria that Ministers have been expressing by stating that employment had risen by nearly 1 million since 1983. However, the number of full-time equivalent jobs rose by only 16,000 between March 1983 and September 1985. The Secretary of State's figures depend crucially on estimates of the increase in the self-employed—a rise of 440,000 during that period. Growth is welcome, but it depends crucially on that estimate.
Even the growth in the employed labour force to which the Government point is lower than in the previous year. During the next three years we must create an additional 113,000 jobs nationally each year merely to keep pace with the rise in the labour force. On present Government policies, there seems little prospect of our being able to do that and to reduce unemployment levels.

Mr. Butterfill: The hon. Gentleman made an important point about the increase in the labour force. Will he confirm that during the 10 years from 1976 to 1986 the increase in the labour force has been about 2 million

people, and that that, rather than the economic policies about which he is complaining, is the major contributor to the present levels of unemployment?

Mr. Wrigglesworth: No, because those people represent an opportunity, not a burden. For every mouth there is a pair of hands. These people can work; they can produce wealth if they have the opportunity. This is why some countries have expanded their population because they want the growth that will come from that. But because of the barmy economic policies that the Government have pursued over this period, we have not had the growth in demand and the growth in opportunities for those people to create the wealth that we would all like to see. The unemployed are not sharing in the consumer boom which the Government are generating, and the Government remain passive and supine in the face of mass unemployment.
The 1p cut in the basic rate of tax will create at most some 30,000 jobs over three years, compared with at least 80,000 through a cut of 10 per cent. in employers' National Insurance contributions, which we advocated. The Government always select the measures which are least effective in creating jobs and which benefit most the relatively better off. It is a macabre achievement of this Government that the direct revenue costs, through benefits and lost direct tax revenue, of the extra unemployment since 1979 amount to £50 billion, almost completely swallowing up the £52 billion that the Exchequer has received in North sea oil revenues during that period. It will be this Government's epitaph that they squandered Britain's golden decade on paying for mass unemployment.
Despite the oil price fall, British industry is still paying a substantial cost in higher interest rates which remain very high and are much higher than is justified by inflation differential with our main competitors. Clearly the Government fear a loss of confidence and a too precipitate fall in the exchange rate. As Roger Bootle, the Lloyds merchant bank economist, has pointed out, the currency markets demand a confidence premium on United Kingdom interest rates to compensate for fears of currency depreciation in the future. As oil price risks should have diminished, the main reason for this must be lack of confidence in the underlying soundness of the economy, or fear of the possibility—and this may be coming in to their reckoning, I suppose—of a Labour Government.
European monetary system entry, openly advocated by the Chancellor and the Foreign Secretary, would in our view help to give more stable and possibly lower interest rates, but there is the danger that the Government might enter at an over-valued and unsustainable rate in order to maintain an anti-inflation discipline. Our view, strongly expressed on a number of occasions over the past months, is that we have had opportunities to go in at a rate chat could have been negotiated. The chairman of the Bundesbank has made it clear that he believes that we should negotiate a lower rate in relation to the deutschmark, that we should go into the exchange rate mechanism in order to bring about that stability and indeed to do the things that, as the right hon. Member for Guildford (Mr. Howell) pointed out from the Chancellor's Lombard speech, are possible if we go into the exchange rate mechanism.
I want to say a few words about the share ownership proposals in the Finance Bill because we on the alliance


Benches have a long-standing interest in this matter. The personal equity plan, which unfortunately has only the barest ground rules for its establishment in the Finance Bill, has turned out to be a pretty emaciated mouse. The cost of tax relief for the scheme in 1987–88 is estimated at only £25 million, which will do very little to encourage the spread of shareholding. The incentives for individuals are minute. This point has been recognised by Conservative Members as well as by Opposition Members. Those most helped by the scheme will be the better-off taxpayers and those on the higher rates who are already utilising their £6,300 capital gains tax exemption and who will be able to build up a tax-free fund.
The apparent exclusion of investment trusts and certainly of unit trusts from the scheme means that on a relatively small amount it would be hard to achieve the kind of spread of risk which would make the scheme attractive to small shareholders. Those who do not benefit already from the CGT exemption will only benefit from the tax refund on reinvested dividends. Although the objection to including unit trusts is that they do not represent direct shareholding, the PEP scheme is unlikely to appeal to the small saver without them. The Chancellor's proposals are quite inadequate to achieve a wider spread of share ownership.
In addition, the Chancellor spoke in the Budget of the need to give profit sharing a greater role in total remuneration. He said that it might make sense to offer some temporary measure of tax relief to the employees concerned to help to get profit-sharing agreements of the right kind off the ground. He promised a consultative document. We welcome that and look forward to receiving such a document; we shall certainly be very happy to respond to it. We are pleased that the Government are adopting that approach, because the greater the consensus on this issue across industry and across this House, the better for all.
The Chancellor could have used some of the £1·2 billion that he has given away in the basic rate cut to give new encouragement to direct share ownership. The findings of the NOP poll which the Chief Secretary mentioned on share ownership are, if I can be fairly modest in my language, somewhat surprising. Some people have been rather dubious about them. They considerably exceed the stock exchange's estimates: 2·5 million shareholders as opposed to 6 million projected by NOP. That is a very dramatic difference. We want evidence beyond that of the NOP poll to show that 6 million is the true figure, because it is certainly not borne out by much evidence, both subjective and other, that is available.

Mr. Richard Wainwright: Does the hon. Gentleman agree that the wider distribution of shares would be greatly encouraged if the Chancellor, instead of virtually abolishing capital transfer tax in this Bill, had remodelled it in such a way as to encourage wealthy people to make a multitude of relatively small gifts of shares to large numbers of people rather than passing on their inheritance to only one or two members of the family?

Mr. Wrigglesworth: Yes. I hope that we can pursue that point in Committee because it is something that we would like to see. There are other things which we would

like to see and which we feel would extend share ownership much more broadly than the Government's measures will.
Whichever of those figures is correct, the fact is that it is well short of the proportion of the population with building society accounts or with bank savings or deposit accounts. Instead of going down the PEP route, the Chancellor should have gone down the route recommended by the stock exchange and provided a modified version of the Loi Monory scheme, a tax incentive-based scheme that has been very successful in France. A tax incentive of £500 in an additional personal allowance, used to buy shares in a qualifying fund, would cost the Treasury about £300 million if 2 million people benefited from the tax concessions. Last year my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) moved a new clause along these lines, and we shall be returning to this issue in Committee.

Mr. Hanley: The hon. Gentleman is clearly in favour of wider share ownership; we all know that. I wonder whether he was in favour of the greatest contribution made to wider share ownership, the privatisation of the past three or four years? How does his party vote on that issue?

Mr. Wrigglesworth: We could support quite a number of the privatisation proposals. The National Freight Corporation has been one of the most successful operations carried out and we have consistently supported it. But the methods by which the Government have privatised some public monopolies and turned them into private monopolies, dominating the market and not giving the consumer real choice or providing real competition, has led us to oppose the most recent privatisation measures.
I do not want to be diverted down this road, but if the Government were prepared to break up the British Gas Corporation into at least four parts and have separate area boards all as private companies, and provide some element of competition where it does not exist under the present proposals, we might support such a move. But all we have is a massive monopoly, with no competition and no consumer choice, being foisted on the public. That is not the way to obtain wider share ownership.
Wider share ownership could be achieved if the Chancellor had also given more direct help to employee share ownership. If he really wants to tackle the adversarial climate which has characterised industrial relations and collective bargaining in Britain for so many decades, he can help to achieve that by giving employees a much more direct stake in the future of their company by giving income tax relief to profit sharing and share ownership schemes or relief from corporation tax in order to encourage them.
Thirdly, if the Chancellor is serious about influencing the current pay round, as opposed to trying to steal our clothes in the consultative document, he should have proposed a payroll incentive of reduced national insurance contributions for companies which concluded longer term pay settlements in line with the expected lower rates of inflation or with productivity improvements. Employees could receive benefits in the form of increased share ownership if they were prepared to negotiate such settlements and could be given substantial tax concessions if they retained their stake in the enterprise.
A reduction of employees' national insurance contributions would help to cut labour costs and to keep


firms competitive. We hope that the Government will look again at the PEP and other schemes and be tempted by some of the pressure from their own Members, as well as that to which they are responding from these Benches, as the general election approaches. Nothing concentrates the minds of politicians more than votes. Clearly that is the case with not only the by-elections but the general election approaching. I hope that that will encourage the Government to look more seriously at some of those schemes for really encouraging more people to take a direct stake in their companies and in shares in other companies. We shall want to see something much more effective than the PEP scheme if that is to come about.

Mr. Terence Higgins: The House will have listened with interest to the frank confession of the hon. Member for Stockton, South (Mr. Wrigglesworth) that the alliance voted against the Chancellor's proposed reduction in income tax. I am sure that we can look forward with equal expectation in the forthcoming by-elections to that being a major plank in the platform of the alliance candidates.

Mr. Budgen: A very high moral stance.

Mr. Higgins: The Second Reading debate of the Finance Bill is typically a mixture of specific comment on individual proposals on the one hand and commentary on the broad macro-economic consequences of all the measures in the Finance Bill on the other hand. I wish on this occasion to follow that tradition and to begin with the good news in the Budget.
One of the disadvantages of the Budget ritual is that on Budget day and the day afterwards the media is full of publicity for what my right hon. Friend the Chancellor is proposing, but the individual proposals are soon forgotten and the Finance Bill does not receive the same sort of publicity. That is unfortunate. Often, local press and radio do not spell out the specific proposals so that those in the constituencies who are affected by my right hon. Friend's proposals are not fully aware of them and so unable to take advantage of them.
In that context it is important that the specific proposals should receive coverage at a local as well as a national level and I want to single out charities for attention, to which my right hon. Friend the Chief Secretary rightly drew attention in his opening remarks. The role of the voluntary sector in our economic affairs is important. It should not be treated as a substitute for Government activity in those areas where the Government can do the job best. For example, I hope that we shall continue to see substantial increases in public expenditure in some areas of the National Health Service.
None the less, the voluntary area is important and deserves to be encouraged. I am glad that the reliefs on some aspects of value added tax have been introduced and, in particular, the two specific proposals on charities which were mentioned—the facility for individuals to make charitable donations with tax relief in individual company schemes and for companies to contribute a sum equal to 3 per cent. of their dividend payments, again with tax relief, to individual charities. That can be important in areas such as my own of West Sussex where companies can, to a considerable extent, make donations to local charities and, in turn, have an important impact on the

community's welfare. That having been said, I share the doubts expressed by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) on clause 29, and I hope that that will receive considerable attention in Committee.
On the macro-economic side, the policy which the Finance Bill implements again brings good news, certainly in the unique combination of reduced inflation and the record rate of sustained economic growth such as we are experiencing. But there are some presentational problems because one of the difficulties of reducing inflation, as we have, from something over 25 per cent. to about 5 per cent., and, I hope in the coming year, to still less, is that we put that forward as a reduction in the cost of living but many of our constituents do not believe that that is the reality. The way in which the cost of living index, or indeed the pensioners' cost of living index, is calculated is not generally understood and that means that people do not believe what is said about inflation.
I hope that my right hon. Friend the Chancellor and his Treasury colleagues will go to some lengths to stress the fact that the cost of living index covers an enormous basket of individual items and is calculated on the basis of individual surveys, which take place every month. When inflation was going up at 25 per cent., big increases in particular items, such as electricity and gas, were submerged, so people were not worried about the cost of living figures. With figures for the overall cost of living down in the 5 per cent. range or lower, a sudden large increase in the price of, say, gas, electricity or rates, casts some doubts on the credibility of the Government's claims. It is important that we should spell out that point.
Another important point came out in the evidence taken by the Treasury and Civil Service Select Committee from the Governor of the Bank of England, many of whose remarks were extremely helpful. The House will recall that the original intention of the medium-term financial strategy was to alter expectations on pay. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was so brave as to produce the original medium-term financial strategy document, which was very much concerned with expectations, in particular on pay claims. The Governor in his evidence on page 67 in answer to question 366 in relation to expectation affecting pay settlements said:
I think there is a sound barrier at around 5 per cent. where a lot of people feel it is not too bad: 'Surely we can have an increase of that sort of level.'
He went on to say that he thought that the point about expectations was now greatly diminished and that, perhaps, is again an important effect of falling inflation.
None the less, the rate of economic growth has been combined with the reduction in inflation and even the TUC, from whom we took evidence, seemed to say that it would be content, if not absolutely delighted, with the 4 per cent. rate of growth. When one looks at the economic forecast one sees that we are on the way to that, but anything much faster than that forecast in the Treasury Red Book might create some real problems in the resurgence of inflation. Let me say a word or two about that.
In particular, I hope that the Select Committee's report, about which several hon. Members have made kind remarks, brings out the way in which policy has changed in relation to the attitude of my right hon. Friend and the Treasury. We have seen a steady progression away from dogmatism in regard to monetarism towards almost complete pragmatism. Indeed, one of the problems that we


face at present is the extent to which economic policy has now become opaque. It is very important that we in the House should seek to analyse the difficulties.
In particular, we have moved very much towards what can best be described as an interest exchange rate policy, and I want to say something about that. In his answers to questions 319 and 320, the Governor of the Bank of England agreed that the rate of interest in other countries with which we are competing is something like half the present rate of interest in the United Kingdom. I therefore think it is important to ask why it is that interest rates are as high as they are.
If one looks at the situation from a domestic point of view first, I think that it is worrying. The Governor of the Bank of England, again in a rather graphic phrase—it is remarkable how well the metaphor stood up—described the overhanging glacier of liquidity in the economy which is continuing in its frozen state only because of the very high level of real interest rates. If real interest rates begin to decline, the problem is that that glacier will begin to thaw, which could have disastrous consequences in regard to the resurgence of inflation.
Despite the good performance to which I referred earlier, I personally have considerable concern about whether we shall succeed in maintaining the downward pressure on inflation that we should all like to see, even though it is done against a background of very different trends in commodity prices from those experienced in the early 1970s.
The other reason why from a domestic point of view we have high interest rates is that which the Chancellor himself spelt out. It is because our unit labour costs are rising faster than those in competitor countries. We had some difficulty in the Committee understanding precisely how this mechanism was supposed to operate, although at the end of the day I think there was a slight suspicion that interest rates were high for a rather old-fashioned traditional reason—that, if unit labour costs were rising too fast, then one put up interest rates to exert downward pressure on companies faced with inflation wage settlements. The Chancellor did not seem to go as far as admitting explicitly that that was the problem.
As to the underlying considerations, the way in which it is assumed that the velocity of circulation of currency—however one likes to define the currency—will continue its recent trend is also worrying. This may be a dangerous assumption. It is possible that we could foresee other factors that would alter that situation. If so, the frozen glacier of liquidity again might create serious problems.
Turning to examine why interest rates internationally are high, I think that it is once more the combination of interest rates and exchange rates. There is cause for concern because the danger is that the high interest rates deter investment. On the other hand, if the real interest rates begin to fall, we may find that all those who meanwhile put the liquidity into interest-bearing assets suddenly decide that the thing to do now is to go out and spend the liquidity because the attraction of those interest-bearing assets has declined in real terms. All this is worrying.

Mr. Butterfill: My right hon. Friend expressed concern about investment. Does he not agree that there has

been a very satisfactory growth of domestic investment—up 8 per cent. last year—and inward investment from overseas, which is remarkable in the circumstances?

Mr. Higgins: On the second point, I welcome both inward investment and investment overseas by the United Kingdom. I have always been mystified by the way that the Labour party is opposed to its going in either direction.
As to the prospects for investment, my hon. Friend must look at the Red Book, and he will see that much of the increased investment has been due to tax changes introduced in a previous Budget in regard to investment allowances and corporation tax. The investment figure for the end of the period covered by the Red Book is not, I think, a very happy one.
I deal now with the main point that I wish to make in regard to the external situation where clearly interest rates are being affected by exchange rates. We have to look at the difference between the dollar exchange rate and the relationship of the sterling exchange rate to exchange rates elsewhere, in particular in Europe. To the broad extent that it is true that we buy in dollars and sell in deutschmarks, we can welcome the change in differential rates in the last year, which is quite remarkable. Because policy has become so opaque—and M3 that used to be the cornerstone of the whole thing was first discarded completely and then reintroduced for only one year, and it is a very strange thing to have a strategy that lasts only one year—and given that that change has taken place, it seems increasingly to be a policy that turns on the exchange rate.
I think we are in some danger of getting the worst of both worlds. Some people have said recently that the way in which one can best deal with the problem is in effect to pretend that we have joined the exchange rate mechanism of the EMS without actually doing so, thereby getting the best of both worlds. I think there is some danger that we will get the worst of both worlds. Unless the band, range or target for the exchange rate is made explicit, there is considerable uncertainty about what the policy really is. The Chancellor has been reluctant to spell out any such range, indeed, to the extent of constantly repeating that he has no such range in mind.
It seems to me that the arguments for the EMS, the exchange rate mechanism and our joining it have improved in the last six to nine months simply because the relationship with the deutschmark is now much more favourable than it was. I think there is a widespread view, not least in the City, that if we were to join, which would be a clear commitment to stay within that range, there would be a considerable flow of funds into the country, in particular from Germany, because people would think that the uncertainty had been removed and the interest rate differential was still very large. If we had that inflow of funds, in my view it is possible that we would find that we could reduce our interest rates by 1 per cent., 1·5 per cent. or even 2 per cent., thereby narrowing the differential significantly to the great advantage of those who wish to invest in industry.
While there are still doubts, as the hon. Member for Ashton-under-Lyne mentioned, with regard to the problem of there being a bi-polar system if we joined, since sterling and the deutschmark would be the dominant currencies, I am increasingly of the view that, if we were to join, there would be some advantage. I am not convinced by some of the arguments put forward by my right hon. Friend the


Prime Minister to the effect that it was a good thing that we did not join some time ago. The fact that it is not worth buying something at a high price does not mean that it is not worth buying something at a much lower price. I think that the exchange rate relativities have improved considerably in recent months.
I wish to give a word of caution on some wider issues. This time last year we discussed at length the dangers of a hard landing for the dollar, in the sense that a sudden collapse of the dollar might mean that interests rates would have to be raised which would cause a major recession in the world with the attendant problems for debtor countries, and so on. I am still worried about that, despite the change that has taken place in the dollar exchange rate over the past year.
More particularly, I am worried about the continued budget deficit in the United States, and about the fact that no real progress has been made in reducing it so that the Federal Reserve bank is still inclined to keep interest rates high to fund it. In turn, that produces a high exchange rate for the dollar, which produces a balance of payments problem. That is still overhanging the situation, and the overall effect is difficult for those debtor countries that are adversely affected, despite the fall in the oil price. There is still a real danger of default, which I hope that the Baker initiatives will do something to help.
Finally, I am worried by the effect of the banking system, particularly in the United States, on agriculture. In that context, many people in the United States who went into farming, perhaps not long ago, and borrowed money, now find themselves, in the light of changed circumstances, with assets worth less than the money that they borrowed. They are voting with their feet and are leaving everything standing.
The oil price, the international debt, the agricultural situation, the dangers to the United States banking system, and in turn, the repercussions that it will have on us, give considerable cause for concern. That will be exacerbated if a trade war develops between the EEC and the system of American agricultural support. That is a real danger that should be given close attention by my right hon. and hon. Friends on the Front Bench, and in particular those in the Treasury.
Having said all that, the Budget, as the Select Committee on the Treasury and Civil Service reports is broadly on the right lines, given the economic situation, although I have considerable concern as to the future stability of the system. By and large, I welcome the Bill, which has many specific proposals that are likely to be beneficial not only in my constituency, but across the country.

Mr. Michael Cocks: This is the first time that I have had the temerity to trespass into a debate on the Finance Bill. Although I am a former Parliamentary Secretary to the Treasury, the House will know that all that is required in that job is a vestigial knowledge of arithmetic. Perhaps the House will be lenient with this first offering.
The Government have made a great deal of the help that is given to charities. It is a pity that their generosity did not extend to other sectors, and make changes that would not have meant much more expense. The first is VAT on headstones for internments and other parts of the necessary funeral expenses, such as flowers and refreshments. The

second is the imposition of VAT on sanitary wear for women—something that has always nonplussed me. It is anomalous, because it is a physiological toss of the coin as to which sex we are, so it is wrong to penalise women. Both those sectors need to be changed.
One of the main features of the Budget for my constituency is the swingeing increase in the tax on cigarettes. I understand the pressures put on the Chancellor to impose an increase, but even if those who are out to destroy the tobacco industry eventually do so, the Chancellor, or whoever is Chancellor in future, must not think that that is the end of the story. There are signs already that the same people, or similarly motivated people, are preparing to launch a heavy attack on the alcohol industry. We are already beginning to get calls for a swingeing increase in duties on alcohol, to minimise the risk of cirrhosis of the liver and other alcohol-related diseases. While there is no increase in alcohol duties on the same scale as on cigarettes, the Government should beware of the pressure that will build up—pressure that may be misjudged.
There is a side effect to what the Government have done that may be of interest, and perhaps the Government will give some consideration to this. I have been contacted by a number of tobacconist-newsagents in my constituency. Following the Budget they had a letter from their proprietor, Kiosks, saying that, because of the size of the increase in the duty on cigarettes, their contracts would be renegotiated to reduce the commission on which they work. The letter says:
it must be clearly understood that the Company makes no profit whatsoever from this additional duty levied by the Chancellor and under the circumstances it simply cannot absorb the commission element.
A number of petitions against the increase in the tax have been collected by tobacconists, but those collecting the signatures had little thought that their own livelihood would be eroded by the company that owns the chain. Perhaps the Government will give some thought to that. I have written to the company about this. That was over a fortnight ago. I have not yet had the courtesy of a reply, so I feel that I am entitled to raise the matter.
A similar squeeze is being put on the landlords of pubs in Bristol. Courage, the brewer, is seeking to take a bigger share of fruit machine profits. The point about the example is that the Government say that they wish to help small business men. However, the larger companies can get away with much, but the small people who work for them suffer. I ask the Government to show more imagination.
For example, one small measure—adjustments to the luncheon voucher scheme—would help small firms that do not have large subsidised canteens. That scheme was introduced over 40 years ago. The Government recognised the worth of the scheme, and the 3s. a day tax allowance was brought into force. At that time, one could buy a decent feed, particularly in the British Restaurants, for 3s. The equivalent, 15p, which is still the allowance, certainly will not. I think that the tax allowance should be increased so that small business men can give their employees the same benefits as those enjoyed by people who work for large firms, or those who eat in directors' dining rooms.
The Chief Secretary has already mentioned the levy on goods produced by the entertainment industry and sold abroad. Here we detect the clammy hand of the Treasury at work. Only two days ago. I received a letter from the


new chairman of HTV, Mr. G. E. McWatters, informing me that the company had been granted the Queen's award for export achievement. He went on:
It seems somewhat sad that the Treasury has recently seen fit to penalise these export activities by a change in the levy arrangements. We do provide a lot of employment in the West Country and hope to expand still further.
That company is being penalised for exporting.
The Budget seems to be more geared to the 27 million in work than to the 4 million out of work, and it does not tackle the basic problems of the economy. During the debate on the Gracious Speech on 12 November I spoke about the erosion of the British manufacturing base over a long period of time and under successive Governments.
I should like to deal with the Government's over-reliance on income from invisible earnings. Yesterday my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) spoke about the decline of British shipping and the Merchant Navy. In a similar debate a few weeks ago the right hon. Member for Taunton (Sir E. du Cann) said that our invisible earnings had declined by £2,000 million a year because of the decline of the British merchant shipping fleet.
We rely on tourism. The recently circulated magazine of the British Tourist Authority said that last year 3 million Americans came to this country and spent about £1,600 million. This year there has already been a drop in the number of Americans booking visits here because of the change in the dollar-sterling rate and, much more recently, because of the situation between the United States and Libya. It is worth reminding ourselves that millions of Americans came here during the war not as tourists, but to work with us to throw back the tide of Fascism which lapped across Europe. I am pleased to add that to my remarks. I hope that the present feelings in this country about the United States are temporary and are not shared by many of my constituents.
The two areas of invisible earnings are subject to variables which are so liable to change that the Government should not rely on them. They should concentrate much more on building up the British manufacturing base. The long-term decline in our share of world markets has been categorised. The Confederation of British Industry recently produced figures showing that there was a drop of 16 per cent. in the early 1960s, to less than 8 per cent. now. Each percentage drop in our share of world markets represents about 250,000 jobs. If we take with that the growth of import penetration, where each percentage point represents about 75,000 jobs, I think we have an explanation for the tremendous increase in unemployment in recent years.
During the course of my remarks on 12 November, I said that we should concentrate more on a "Buy British" campaign. I gave an example of somebody buying a Metro or a Maestro with 95 per cent. British content as opposed to a foreign car, saving the Exchequer about £1,000 in benefit payments, because it represents two months work for one British worker. Recently, when the Government announced the placing of an order with Cammell Laird they said that the order represented 2,000 jobs over two years. If buying British is analysed in that way, it should be much easier to persuade people to buy British in order to preserve and create British jobs.
We must use our reservoir of equipment, labour and skills to develop a robust manufacturing base and free ourselves from over-reliance on invisible earnings, which are subject to external variables beyond our control. We should give up blaming the work force. We should overhaul our management techniques, learn from other people and become much more competitive.
The Budget does not measure up to the job required. It is not sufficiently drastic. It does not give us the national catharsis that we require. It really only tinkers with the problem. The situation should be taken by the scruff of the neck. It has been done before. It was done in the post-war period by the 1945 Clement Attlee Government. Millions of people were demobilised from the forces without any large scale unemployment. The economy was changed from a war-time to a peace-time footing without disruption. Although our major utilities had been run on a care and maintenance basis, the country was put back on its feet in a remarkably short period. That is the effort of which the British people are capable. That is the sort of effort that we need, but it is not the sort of effort that the Finance Bill will encourage.

Mr. Nigel Forman: It is always a pleasure to follow the right hon. Member from Bristol, South (Mr. Cocks) especially when he takes the House into the interesting byways of tombstones and tobacco. As somebody who is actively engaged in the campaign against smoking, I believe their there may be some small connection between those two items. But let that pass.
I intend to do something rather unusual in this debate. I shall try to address the burden of my remarks to the Bill. I realise that it is common for the debate to range widely, and I do not criticise that. However, I believe that it is important that my right hon. and hon. Friends on the Front Bench should hear at least some views on the substance of the Bill as well as a general tour d'horizon of the economy, national or global. I take it as read that a number of satisfactory points about the economy have been well made by my right hon. and hon. Friends and I shall not repeat them.
I wish to devote the brunt of my remarks to three aspects of the Bill in which I am especially interested and which I think are especially valuable. Clause 15 sets out the income tax rates and main reliefs. that is obviously a welcome part of the Bill in the sense that any cut in the standard rate is a good thing. It is also welcome because it should be seen in the context of a broader move towards a standard rate of perhaps 25p in the pound by the end of this Parliament.
Even if we reach that state of nirvana, which will be difficult to achieve because of the cost, I believe that the more important strategic objective for income tax is to achieve a gentler tax gradient from an entry point of, say, 25p in the pound to a maximum rate of 50p in the pound, instead of the present disincentive pattern of income tax. As the House will know, one enters at 29 per cent. and there is then an incredible 11 per cent. leap to 40 per cent., then 45 per cent., 50 per cent., 55 per cent. and 60 per cent. That means that millions of income taxpayers are faced with the equivalent of an income tax cliff which, coupled with the impact of national insurance contributions on employees, is clearly having harmful


effects. If one wants to adduce arguments about the disincentive effects of taxation, one need look no further than that unfortunate profile in our income tax system.
I have made a few inquiries about the cost to the Treasury and the Exchequer of seeking to ameliorate or overcome some of the problems I have identified. I remind the House that on latest estimates it would cost about £1,800 million in income tax yield forgone to abolish all the higher rates of income tax. That would be equivalent to getting rid of only about 5 per cent. of total income tax receipts. I am not saying that should be the policy, but I am putting those facts on record simply to remind hon. Members that we have higher rates of tax, even as they stand now, largely for political, social and redistributive purposes, not really for revenue-raising purposes to any serious extent.
If one wants an even more significant figure, it would cost about £7,000 million in a full year to change from the present profile of income tax—the cliff to which I referred—to a gentler and more sensible gradient which is what I and many of my hon. Friends would prefer. The reason is that so much of this cost comes from the standard rate band which, as the House knows, is where the bulk of the revenue is raised. Therefore, if one were to make the transition which I am advocating, it would be sensible to phase it in over several years. The argument that this is completely beyond the pale no longer stands up when one regards it as a project to be conducted over, say, three years. A sum of £7,000 million taken in three stages over three years does not seem excessive.
Furthermore, the argument that it is administratively too complex to move into a new six-band structure does not hold up because we already have a six-band structure. The only thing wrong with it is that its shape is wrong. By the time those changes were feasible, they would be contemporaneous with the introduction of computers into the Inland Revenue. I would like that change to be made.
I hope that the Whip present will note that it would be a good idea to have a further separate debate on personal tax reform in which the House could discuss all these issues.
Clauses 21 to 25 make improved provision for employee shareholdings. I welcome this latest instalment of the general move which the Government have made in that direction, which was already evident in the Finance Acts of 1978, 1980 and 1984. Now is the time for the Government to go much further with larger tax incentives to give what the Chancellor describes as a bigger kick-start to an excellent development that has been in motion under Governments of both parties.
It has become imperative to take a more radial approach to this area for several reasons. First, wider employee share ownership in all its forms leads to improved corporate performance and there is plenty of evidence from the National Freight Consortium, from the John Lewis Partnership and from the United States to support my contention. Secondly, the schemes can encourage a more sensible attitude towards pay at a time when unit labour costs are still one of the major problems of the economy and are increasing far too fast for the national good.
In that connection, there is a close correlation between the ideas which are being supported in these clauses and the slightly more speculative ideas of Professor Weitzmann on revenue sharing, which the Chancellor intends to discuss in the National Economic Development

Council and elsewhere. I wish him well with that consultation process. I hope that it leads to early legislation in the next Session.
The third reason why this is such a good direction of policy is that it is manifestly popular with employees and, therefore, encourages more positive attitudes, which will help to overcome the age-old problems of "them and us", which have been so well identified in a recent Stockton lecture by my right hon. and noble Friend the Secretary of State for Employment. It is encouraging to see that tax-exempt, all-employee share schemes have increased from a mere 30 in 1979 to more than 1,000 today. I hope that development will be encouraged further.
Finally, the schemes are an excellent development because wider and deeper employee ownership has external benefits for the nation as well as some small risks for the employees, since they must put many of their eggs in one basket. In view of the extra risk for the employees concerned, there is a strong case in natural justice for more generous tax incentives. That strengthens the argument for what the Government are trying to do in these clauses. These tax incentives need not be built permanently into our fiscal system. They could be time-limited for the companies and individuals involved. But once the habits of wider share ownership become established, the process will grow naturally and spontaneously for the benefit of the entire economy.
My right hon. Friend the Chancellor should heed the warning set out recently in a leader in The Times that his welcome experiment with the personal equity plan should not be allowed to divert our attention, or indeed available resources, from the need to go further to encourage employee share ownership. There is always a danger of the idea of employee share ownership being seen as a perk for senior management and not much more, so I agree with the Wider Share Ownership Council that tax relief for executive share schemes should be conditional on the company's running a scheme for all its employees. That is the right approach to overcome the possibility of "them and us" problems rearing their head again.
I am very much in favour of clauses 26 to 31 providing an attractive package of encouragement for charities and charitable donations. That was an excellent part of the Budget because it recognised in a way which everyone will appreciate the range of good work done by charities and voluntary organisations. In the longer term, it is also important because if the Chancellor is thinking, however gently, of moving away from the holy grail of fiscal neutrality, which in our tax system seems almost impossible, it opens greater opportunities for donations to higher education. I was struck recently by a letter that was sent to me and, I suspect, to other hon. Members who may sit on the Finance Bill Committee, from Birkbeck college in the university of London stating:
There is a precedent for tax relief: membership of professional and learned societies already qualifies. Our suggestion is, therefore, that fees and other costs incurred as a consequence of part-time study should be tax-deductible.
Bearing in mind the Government's strategy on adult training and retraining and on the need to invest in human capital, which is what further and higher education is about, that is a point—albeit a small one—worthy of my right hon. Friend's consideration. If we could supplement a healthy volume of public support for higher education by tapping some of the private support which


could be released by such fiscal mechanisms, we should do a service not only to the individuals concerned but to the country.
This has been a prudent Budget, which has produced a sound Finance Bill. It contains some interesting and imaginative components which bode well for the future, provided that they are followed through and not regarded as a one-off exercise. In two areas especially, the Finance Bill should be seen as part of a much longer-term policy. The first is personal tax reform, which we must approach in terms that involve more than playing around with personal tax allowances, important though they are. Personal tax reform should be considered much more widely. We do not get more than one chance in a generation to reform such matters.
The second area is the encouragement of worker capitalism, with much greater extension of the interest and involvement of employees in their firms, which must be to their benefit and, much more importantly in the long run, to the benefit of the economy.

Mr. Sean Hughes: My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) described the Finance Bill as irrelevant. Those of us who represent constituencies blighted by unemployment will bear testimony to that description. I shall address my few remarks to the glaring omission in the Budget and the subsequent Finance Bill of anything which might begin to tackle the massive unemployment problems.
We should judge the Finance Bill in the context of almost seven years of Conservative Government. They have introduced eight Budgets and eight Finance Bills. In view of their 1979 election slogan "Labour isn't working", we have the right to judge the Finance Bill in the light of promises and performance.
I remind the House what the promises were. In June 1979, we had the Government's first Budget. The former Chancellor of the Exchequer declared:
The Budget is designed to give the British people a greater opportunity than they have had for years to win a higher standard of living—for their country and for their families."—[Official Report, 12 June 1979; Vol. 968, c. 263.]
Twelve months later unemployment had risen to 1,375,600. Still, we must give new Governments a chance. Historically, every Chancellor has found the economy in far worse a state than he believed before the election. So the Government, so concerned with unemployment before they took office, had to be given time to prove they meant what they had promised.
In his second Budget on 26 March 1980, the then Chancellor declared that the strategy of the Government was
the best foundation for higher growth, fuller employment and a return to rising living standards."— [Official Report, 26 March 1980; Vol. 981, c. 1451.]
Twelve months later unemployment had risen to 2,333,500.
Perhaps it was to be third time lucky. In his Budget introduced on 10 March 1981, the then Chancellor stated that the Budget would
help redress the balance of the economy in favour of business and industry."—[Official Report, 10 March 1981; Vol. 1000, c. 783.]

Most of us thought that that would mean jobs. However, 12 months later unemployment had risen to more than 2,800,000.
By the time of the fourth Budget on 9 March 1982, we had all become a little sceptical about Budget claims. However, the then Chancellor made a promise early in his Budget statement that it would be
a budget for industry—and so a Budget for jobs.
Raising himself to unaccustomed heights of oratory, he concluded that the Budget anticipated
a better prospect of employment opportunities for those who look only for the chance to work."—[Official Report, 9 March 1982; Vol. 19, c. 727–57.]
Twelve months later, unemployment had passed the 3 million mark.
The fifth Budget, introduced on 15 March 1983 turned out to be full of election promise. In what was to be his last Budget statement, the then Chancellor concluded that it was
a Budget for the family, a Budget for enterprise and, most of all, a Budget for Britain's continuing recovery."— [Official Report, 15 March 1983; Vol. 39, c. 157.]
Twelve months after that the unemployment figures would have reached more than 3,333,000 had the Government not removed unemployed men between the ages of 60 and 64 from the unemployment figures.
The present Chancellor of the Exchequer continued the delusion of recovery in the Government's sixth Budget on 13 March 1984. He claimed that there was an economic recovery
whose underlying strength is now beyond dispute".—[Official Report, 13 March 1984; Vol. 56, c. 286.]
Twelve months later, even after fiddling the figures, unemployment had still reached 3,267,000.
In the Government's seventh Budget, in 1985, the Chancellor intoned:
There can be no disputing the strength and durability of the economic upsurge."—[Official Report, 19 March 1985; Vol. 75, c. 784.]
Scaling new heights of lunacy, the Chancellor declared that the Budget was "a Budget for jobs". Twelve months later, the by now notoriously fiddled unemployment figure had reached 3,323,800.
What then are we to make of the Chancellor's remark in the Government's eighth Budget last month? He said that it was a Budget which was
a safeguard for the present and a springboard for the future."—[Official Report, 18 March 1986; Vol. 94, c. 184.]
Which chapter of the Finance Bill, which clause, which of its 200 pages, gives any reason to believe that the optimism is justified this time and that the Government mean what they say?
The Finance Bill is perhaps the most important legislation to be considered by Parliament. It must not be allowed to ignore the single most important problem which the economy faces—the problem of massive unemployment. I am not one of those who believe, or indeed would want, the Government to interfere in every aspect of our lives. I do not argue that Governments can be the sole regulator of economic forces. However, I firmly believe that the Government set the tone, and create the atmosphere. The Finance Bill we are discussing tonight certainly does that.
The Finance Bill sets the atmosphere and the tone, for example, with the reduction of stamp duty on share transactions. The Chancellor took great pride in the fact that next year, an adult will be able to invest up to £200 a month in shares. But what relevance does that have to


someone living on £30·45 a week -unemployment pay, £29·50 a week supplementary benefit, or £38·30 a week old age pension? People on those incomes have as much chance of investing £200 a month as the England cricket team has of scoring 200 runs in the West Indies. The irrelevance which takes most beating is the provision to abolish entirely the tax on lifetime gifts to individuals. That really set things alight in my constituency.
As I listened to the Chancellor outlining the proposals about lifetime gifts, and the subsequent comments today, I was reminded of the reaction to William Harcourt's death duties when they failed to produce the revenue which had been anticipated. People, it was said, were not dying up to expectations.
The unemployed are wondering whether they figure at all in the Government's expectations. As I listened to the Chancellor and to his hon. Friends, I was confirmed in the belief that he and I occupy different worlds. How else could he justify such an appallingly irrelevant Finance Bill? I would like to tell the House of the reality of my world. In my constituency last month 10,292 people were registered as unemployed and there were 167 vacancies at the jobcentre. There were 707 18-year-olds or younger who had never worked since leaving school and three vacancies at the careers office. The insensitivity of the Government Front Bench is no more than we have come to expect. They flaunt their insensitivity; they do not try to hide it; they glory in it. Like the Edwardian publication The Queen, they proclaim:
It is the fashion today to talk of social duty and the right to live, but nobody has the courage to say that we belong to different worlds.
The Government certainly have the courage to say that, and that forms the very basis of their policy. That is why the Budget and the Finance Bill are so irrelevant to our real problems.

Mr. Neil Hamilton: With all the talk of reshuffles, and as a person of modest ambition, I naturally turned my mind recently to the problem of how to get on in the Tory party, and I have taken advice from where it was available. One piece of advice that I received was that one should acquire a nodding acquaintance with the works of the late Mr. Disraeli. Having delved into Mr. Disraeli's novels on the Young England and on the theme of Two Nations, I must admit that I find those novels more entertaining than the exercises in fiction on the same theme by my right hon. Friend the Member for Henley (Mr. Heseltine).
When reading the novel "Sybil", I encountered a character who reminded me very much of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Appropriately enough, that character was called Mr. Kremlin, who was "distinguished for his ignorance as he had only one idea and that was wrong." The right hon. Member for Sparkbrook has one idea, which is that the cure for all our ills is higher Government spending. Although the right hon. Gentleman tries to wriggle out and deny the fact, we all know that the Labour party's plans for increased spending, which were costed and appeared in the Official Report on 3 March, amount to £24 billion.
When the right hon. Gentleman is asked how that cost would be financed, like a fish landed on the ground out of water, he flaps, gasps and puffs out his gills, but he cannot come up with a convincing riposte or explanation. He fails

to explain how the Labour party would encourage investment by taxing at penal rates. I suppose that the right hon. Gentleman is following the illogicality of the previous Labour Government, who, at a time of rising unemployment, attempted to reduce it by putting a tax on jobs. Of course, the Government have abolished that in the course of the past eight years. That was one of the features of the Government's financial policy to which the hon. Member for Knowsley, South (Mr. Hughes) did not feel it necessary to allude.
The right hon. Member for Sparkbrook also failed to explain how he would encourage enterprise and attract managerial ability through the Labour party's proposal for the confiscation of earnings. It was clear from his speech that, if the country has the misfortune to return a Labour Government at the next election, we will be back once again to a 98 per cent. marginal rate of income tax.
The right hon. Gentleman defined the rich as the top 5 per cent. of earners and the right hon. Gentleman's proposals would cover everyone with a taxable income of £16,000 or more per annum. I am not sure whether they are people whom ordinary people would consider to be rich. There are people of relatively modest means who come into that category. The right hon. Gentleman completely failed to tell us how the national income will be increased by supporting Luddite trade union policies, be it Scargillism or that which we find in Fleet street or Wapping.
Lastly, the right hon. Gentleman failed to explain how he will reduce unemployment by increasing taxes and interest rates. Inflation would be the inevitable consequence of those policies.
The policies of the right hon. Gentleman are followed, albeit at a distance, by those who sit on the alliance Benches, although quite whom they have followed at the moment I do not know, because none of them are in the Chamber. Recently I have devoted—I admit that it was a somewhat unrewarding pursuit—some attention to the alliance documents on its economic and financial policies, in particular its Budget recommendations for this year. The document is called "Jobs and Competitiveness." I have found a number of interesting points in that document, about which the House and the nation ought to know. It contains a number of false premises. The document says that Britain is becoming a
low growth, low productivity, low skill economy.
I had to look once again at the date of the document, because I thought that it might refer not to 1986 but to 1976 under the Labour Government of which all the leaders of the Social Democratic party, although they would like us to forget it now, were enthusiastic members. The contrast is most instructive.
In his Budget speech my right hon. Friend the Chancellor of the Exchequer pointed to this Government's record. The growth rate is relatively high and productivity is increasing. There have been five years of growth at 3 per cent. per annum. That growth rate was exceeded in 1985. Then the growth rate was 3·5 per cent. per annum. It was the highest growth rate in the EEC, and it was higher even than in the United States.
As for low productivity, compared with the period between 1974 and 1979 when manufacturing productivity rose by less than 1 per cent. per annum and when it was the lowest of all the G5 nations, that has been increased in the last six years to 3·5 per cent. per annum. We are second only to Japan. As for the manufacturing sector,


about which there is so much misinformation, in 1985 output increased by 3 per cent., productivity increased by 4 per cent. and exports increased by 6 per cent. That is a creditable achievement. It is the result of seven years of sound financial discipline.
I contrast the alliance Budget representations for this year with what it said in its autumn statement entitled "Facing the jobs challenge." It has two plans to reduce unemployment and increase economic activity. According to its latest document, the alliance proposes to spend an additional £3·5 billion to reduce unemployment by 750,000 over the next three years. Six months ago, it proposed to spend £5 billion to reduce unemployment by 1·5 million over four years. One might ask why the alliance is being so modest and moderate in its demands. According to the latest calculations, why not spend £10 billion to reduce unemployment by 2 million or indeed, £15 billion to reduce unemployment to zero?
One might ask why this inflation in the cost of reducing unemployment has occurred during the last six months. In September 1985 the alliance calculated that it would cost £3,300 per job to reduce unemployment over four years, but in March 1986 it calculated that cost at £4,650 per job over three years. It is a great shame that nobody is sitting on the alliance Benches to explain why this arithmetical invention is as it is.
How would all this be financed? The alliance says that it will not increase taxation and that it will be financed by borrowing. How will the borrowing take place? Will the alliance borrow from the public? That would merely divert resources from other productive uses. All it would do, therefore, is to shuffle unemployment around different sectors of the economy.
Would the alliance borrow from abroad? If so, it is a belated convert to Reaganomics, about which it is so scathing, although that is exactly the policy that has been adopted in recent years by the United States, which sustains the United States' artificially high rate of economic activity at the cost of that of western Europe. That has implications for interest rates and the exchange rate. It also assumes no loss of international confidence, despite the new laxity in borrowing that its policies would entail.
Lastly, would the alliance borrow from the banks? If so, the consequence would be that inflation would be bound to increase. It is evident that the alliance is not satisfied with the levels of debt interest that we are paying at the moment—£19 billion a year out of £170 billion of public expenditure. That now accounts for over half the revenue from income tax, or the whole revenue from value added tax.
There is a word to describe this kind of economics. It is Dunwoodyism: the theory that there is such a thing as a free lunch, that one can eat lunch today and that the bill will never come in at the end of the day. As my hon. Friend the Member for Cheltenham (Mr. Irving) proved in his example and as the International Monetary Fund proved during the life of the last Labour Government, there comes a time when the bills have to be paid. Therefore I counsel the alliance to profit by our experiences since the war under Governments of all political persuasions and to realise that there comes a time when the cash runs out.
In the alliance's autumn statement of last September there seemed to be a number of extraordinary muddles about what it should be doing about a monetary policy. It castigates our Government because of their supposed commitment to a failed monetarist policy, but on the same page it calls for a steady monetary policy. It says:
An Alliance Government would keep a firm grip on the money supply.
In addition, the alliance would stabilise the exchange rate by joining the European monetary system, but it does not say that that would entail even greater reliance upon short-term monetary aggregates and upon interest rates, which supposedly it does not favour.
There is the same confusion about inflation. The right hon. Member for Plymouth, Devonport (Dr. Owen) said:
If inflation is held down, unemployment will then begin to fall. Anything less must mean that unemployment will continue to rise."—[Official Report, 29 June 1983; Vol. 44, c. 604.]
However, in this document the alliance postulates a rate of inflation, if its policies are followed, of 7·5 per cent. That means that inflation would be more than double what it is now. Before it starts to lecture my right hon. Friends in the Treasury on economic policy in order to put the country back to work, I suggest that the alliance ought to settle the muddle about the premises upon which its policies are based.
The great panjandrum for the alliance was referred to by the hon. Member for Stockton, South (Mr. Wrigglesworth): that what will keep all these conflicting objectives in line is an incomes policy. The reason for an incomes policy was provided by the hon. Member for Truro (Mr. Penhaligon), who I understand is now the economic guru of the Liberal party, although he has not been present throughout the entire debate. However, as the Liberal party's economic spokesman he said at its assembly last September that we have to commit ourselves to a pay policy, otherwise all that can be said about the economy becomes fluff in the wind. Homespun economics we might expect from the hon. Gentleman, and fluff in the wind is a good description of the alliance's economic policy.
If we look in detail at its proposed incomes policy, we see how absurd and impossible it is that it could contain the inflationary forces that would be let loose if the alliance's other economic policies were to be implemented. In its Budget representations on page 7, it says that the alliance's incomes policy would cover increases in average earnings that exceeded a predetermined inflation limit. That has to be contrasted with what the alliance says in the same document on a previous page: that it would aim at moderating earnings growth and that it would relate it to growth in productivity.
The alliance has to decide what is to be the basis of its incomes policy. Is it to be productivity or inflation? What happens if productivity is greater than inflation? Are wage increases to be held down below the rate of inflation to those of productivity? One could ask the same question the other way round: what if inflation is greater than productivity? Are inflationary wage increases to be permitted, notwithstanding that they are not covered by increases in production? There is no necessary connection between productivity and profits. We know that if Jeffrey Archer sells more books, Debbie Owen makes more money. It appears to me that the alliance policy on incomes control is flawed from the start.
The alliance says that companies with profit-sharing schemes will be exempt from the policy. That is a contradictory objective, because the more successful those companies are in expanding profit sharing, the more ineffective becomes the inflation tax that the alliance proposes as an incomes policy. There are so many exemptions to the incomes policy that one wonders to whom it applies. In addition to firms with profit-sharing schemes, which cover about 5 per cent. of the working population, firms employing fewer than 100 employees will also be exempt. That represents a further 49 per cent. of the working population. Because there will be an inflationary seepage to workers in small businesses, the rest of British industry will be able to give only lower than average increases and increases lower than the average rate of inflation.
The self-employed will not be covered under the proposed scheme. New firms and people who plan to change jobs will not be covered also. The public sector, which represents 25 per cent. of workers, will be exempt from this inflation tax.
One can see the avoidance techniques that would come about if such a scheme were introduced. Techniques such as replacing cash payments by fringe benefits, new job descriptions, people being promoted artificially and changes in hours and conditions of work would prevent the incomes policy from working effectively.
What about the jobs in which productivity cannot be measured? For example, where would Members of Parliament fall in this scale? What about supply and demand in the real world? That does not feature in the alliance's policy. The alliance fails to realise that profits ultimately reflect not productivity but supply and demand, although productivity naturally feeds into it. The same applies in respect of wages.
The retail prices index, which presumably is the basis upon which the alliance would calculate the inflation limit, is itself an average. Some prices go up more than others. The average is the exception rather than the norm, as is the case with incomes. Not all incomes can or will go up by the average. Therefore, why should others not be able to go up by more than the average? Those are the questions that people faced with these decisions will have to answer, and all that will add to the the cost of the bureaucracy. The alliance has not told us how its inflation tax is to work—whether it will tax 100 per cent. of the excess over the predetermined inflation limit, or whether it will be merely a part of it.
We will return to all the palliatives and quangos that have been set up by previous Governments. Statistical necromancers will study the entrails of chickens to decide what inflation will be like in a year's time to place a predetermined straitjacket on the economy. At the end of the day, we shall get the inevitable bust-up. What happens when the quangos make mistakes, as they did in 1974 when the pay board got the calculation of miners' pay increase wrong? That torpedoed the Heath Government, but for what?
At the end of the day, the basis of the alliance's policy is to mistake the cause of inflation. Every year since the Conservative party has been in office, GDP has risen in real and monetary terms. Unfortunately, unemployment has risen also. We can derive from that that unemployment

has not a macro-economic demand-related cause but a micro-economic cause to which the Government have devoted considerable attention and which the Finance Bill plays an important part in eliminating.
Instead of trying to drag us kicking and screaming back into the 1960s, as the alliance would seek to do, the Government are continuing, in an effective way, with their imaginative policies. We must base high economic activity and low unemployment on sound financial and economic policies. That is the best way in which the future prosperity of our people will be guaranteed.

Mr. Austin Mitchell: I will not support the hon. Member for Tatton (Mr. Hamilton) in his devastating attack on the alliance, which had all the power and effect of being hit around the head with a piece of wet, uncooked tripe. It is interesting that alliance Members responded in their usual tumultuous fashion by total absence, instead of the partial absence that is almost normal for the alliance.
The sad, irrelevant, Finance Bill has a couple of things in common with previous Finance Bills which have been introduced by the Government. Most of the Bills have had vainglorious titles. I remember the Budget for enterprise, which was the prelude to our cataclysmic manufacturing decline which practically turned this country into the world's first undeveloping country. Last year the Government brought down a Budget for jobs. Unemployment continued to rise to levels which this country had never seen. Quite frankly, this year's Budget has been a budget for votes, which is almost certainly a guarantee that the Conservative party will lose the next election.
There is another common pattern. Whatever the vainglorious titles of previous Budgets, each has provided a set of give-aways to wealth—a steady pattern of smuggling more money into the back pockets of wealth and power in this country. However difficult the circumstances, however great the need for sacrifice, however strenuous the ceremonising to the rest of the community, there are always five or six handouts to wealth.
There have been handouts in several forms—a fiddle here, a fudge there, a change there, a cut in the rates, an adjustment, a little trimming, some fiddle on the capital transfer tax or a rebasing of the capital gains tax. Behind the deluge of public relations words backing the Budget—the vainglorious rubbish talked about the Budget—a steady dribble of money has been given to the wealthy in the community. On our calculations, this year £3·5 billion has been provided to the top 5 per cent. or so of the wealthy. The Child Poverty Action Group has stated that the richest 7 per cent. will benefit to the tune of £2·6 billion this year as a result of direct tax cuts in the Government's Budgets. The common pattern has been vainglorious titles and a steady dribble of concessions to wealth.
The Finance Bill represents a wasted opportunity. It is the product of mountains which have laboured. It produces an interesting insight into the Chancellor's psychology, because it is the product of somebody with a tricky mind and rather nasty instincts when it comes to considering the people of this country. The Budget and the Finance Bill provided an opportunity to generate growth. We need growth.
The figures cited by the hon. Member for Tatton and the Government about the Government's achievements and the growth they have secured are figures which have been supplied since 1982. It is as if the world suddenly began in 1982. The enormous disaster that the country was dragged into between 1979 and 1981 has been totally ignored. The Government achieve growth by conjuring up the figures from 1982. In fact, every year since the Government have been in power the average growth rate has been 1·2 per cent., which is pathetic. The rate is lower than the average growth rate for the previous Labour Government, which the hon. Member for Tatton castigated. That is the record of the Government. There is a desperate need for growth.
Since the Government have been in office, there has been a catyclismic rise in unemployment. The Government had enormous success in getting down the unemployment figures. The tragedy is that unemployment has continued to rise. The figures have been fiddled to indicate that the Government have got unemployment down. Since the Government have been in office, 15 adjustments have been made to the unemployment figures. Each adjustment has been an adjustment downwards. We need growth to reduce unemployment and to expand the economy.
We need the kind of expansion that President Reagan has provided in the United States, but not in the manner that the hon. Member for Tatton indicated. President Reagan's approach to the economy is to implement Keynesianism without understanding it. His answer is deficit financing. Eight million new jobs have been generated in the three years that he has undertaken deficit financing.
As my hon. Friend the Member for Knowsley, South (Mr. Hughes) put it, this country had an opportunity, in the golden years, the opportunity years, to expand. Oil revenues provided that opportunity. The benefits of channelling North sea oil towards industry would allow growth, provided the pound was kept down. The Government, in the past seven years, have thrown away that opportunity. However, Sheikh Yamani has graciously condescended to provide us with another opportunity. This is Sheikh Yamani's Budget and Finance Bill. He has provided us with an opportunity through the stimulus that the fall in oil prices brings to the economy of Britain and the world. The world economy is expanding. The world faces a benign prospect. We had a chance to seize that opportunity. To do so, we needed to expand and stimulate our economy, especially with lower interest rates and by putting cheap money at the service of the people, not of the financial community—the City and the banks.
Why are Britain's interest rates practically double those of our major industrial competitors? Why are interest rates in Britain so high? The Government have had one consistent element in their policy—high interest rates. There has been a series of excuses, but there has been a pattern of high interest rates. There has been a constant series of rumours that interest rates would decrease, that there would be a drop in the mortgage rate, that the climate was favourable and that the money supply figures provided an opportunity. But interest rates have never fallen as much as we were told, because the reductions have been

in terms of half a per cent. here, half a per cent. there, while the increases have been 2 per cent. or more. There has been constant pressure to keep interest rates high.
The so-called success in bringing interest rates down has been the heralding of an expected decrease, which has never quite come. It has been reduction by rumour, not in reality. Britain's interest rates have been consistently higher than necessary. Interest rates have been crucifying borrowers, home owners, people with overdrafts, local government, industry and investment. They have imposed a burden on the whole economy.
The banks, which have been the biggest barrier to enterprise, are always eager to lend to South America—indeed, to anyone overseas—and to rush into the newly industrialising countries. They irresponsibly expose themselves. It is like a flashing filigree in a flimsy farce. The banks are eager to expose themselves in an economically and commercially undersirable way. They lend reluctantly to industry, demanding an instant return—in months rather than years—while not being prepared to finance the long-term investment that Britain needs. They thrust umbrellas at people when it is sunny, but snatch them back immediately a hint of rain is seen on the horizon. The banks' record is counter-productive. They, not the nation, have been made rich by this interest rates policy.
It is interesting, as can be seen from the report of the Select Committee on the Treasury and Civil Service, that the biggest stimulus to the economy was an increase in capital spending. The parliamentary unit of the university of Warwick went through all the possible stimuli to the economy according to the London Business School model. Public spending was so important because it had the greatest and most immediate effect in reducing unemployment and stimulating growth. The second biggest stimulus was a 1 per cent. cut in interest rates. It had a greater effect than a 5 per cent. cut in income tax, a 10 per cent. increase in allowances or a 10 per cent. cut in VAT or in employers' national insurance contributions. A cut in interest rates has a greater effect in reducing unemployment than any of the other expedients.
The Government's excuses for their high interest rates have varied from time to time. When the Conservative party was elected, it told us that, until the money supply was brought under control, interest rates had to be high. That led almost immediately to the folly of 17 per cent. interest rates and the pound being worth, I believe, $2·40. That excuse was withdrawn and the public sector borrowing requirement was blamed. We were told that interest rates would remain high until the PSBR was reduced. Britain's public sector deficit is lower than that of most other countries, but interest rates have remained high. However, the excuse underpinning them has been knocked down.
For a time we were told that, because American interest rates were high, Britain's rates had to be high to follow them, but that excuse has now gone. The Government now have a new excuse: Britain's interest rates are high because we pay ourselves too much because our labour costs are increasing. The report of the Select Committee on the Treasury and Civil Service states that one of the rare points of unity between the evidence of the CBI and the TUC is that that excuse for high interest rates is wrong. The CBI stated that interest rates would be high even if


labour unit costs were falling—an interesting reflection on its faith in the Government. The Select Committee concluded:
We ourselves have difficulty in following the mechanism by which high interest rates will produce lower wage increases. Part of the confusion arises because government statements do not always distinguish clearly between cost-push inflation and demand-pull inflation.
That is just another excuse in a long series of exploded excuses. The reality is that interest rates are high and the Government's excuses for that reality have changed. Interest rates are high to keep the value of the pound high. A high-value pound is the Government's only effective weapon against inflation. Indeed, it is their only weapon. They say that they will keep inflation down by keeping the cost of imported manufactured goods as low as they can through an overvalued pound. In other words, they say that they will let industry, which must compete with those imports, carry the consequences of the Government's inflationary strategy. That is an inflationary strategy of placing a pistol directly at the head of industry.
High interest rates are a double blow to industry. They cut investment and channel industry's money and profit into the frenzy of takeover and speculation that is occurring in London and all over Britain. It is similar to the last days of the Roman empire. The Government are not doing anything for the long term. Firms are merely going in for tribal cannibalism on an enormous scale. That is the first burden of high interest rates. The second burden is an overvalued exchange rate, which effectively subsidises imports and penalises exports. Our exchange rate is substantially overvalued. That is the only justification one can see for high interest rates, or that is what the Government think.
The Government have no strategy on inflation, except for sermons. It is no use preaching at industry to keep its labour costs down and to stop wage increases, because an industry that is competing with overseas firms has to pay to attract skills, to keep its labour force and to keep that labour force working. Sermons are of no use in the face of such pressure. Companies awash with cash can pay without those difficulties, because they set the market rate.
When directors and top management lavish so much money on themselves, as we have seen in the recent massive pay increases, it is indecent and obscene for them to demand that the rest of the people should hold their salaries at their present rate or accept cuts. They cannot preach with one voice and accept more money in the back pocket, as they have done, with any semblance of morality. There is also the hypocrisy of the Chancellor. Demand is predicated in the forecasts on consumption—consumption sustained by the wage increases that the Chancellor condemns with his other voice.
Costs in the United Kingdom are increasing faster than those in competing countries. Inflation in Britain is higher than in competing countries. I gather that Germany and Japan have enjoyed negative inflation. We should be seizing the opportunity provided by low oil prices, not limping behind the rest of the world and getting less benefit from the growth that is to come. We are limping behind because we are penalising ourselves with high interest rates and an overvalued currency. We are a limping, lame bulldog. We do not even have a licence to bite now, and we are lagging behind the advanced world. The Finance Bill fails to take advantage of the opportunity to escape from that. The Bill is also irrelevant to that need

and to the purposes of a better society. The Finance Bill, in this difficult time, insists on handing out more and more to those who have more of it.
The Government are in a trap. We shall try to restore the social justice which has been missing from the Finance Bill. The Chancellor discussed the costs of the inflationary pressure of expansion, but he must bear in mind the cost of running the economy for discipline. We should never forget the damage which has been done by that discipline, nor the horrendous cost in terms of high unemployment and keeping people out of work. The present state of affairs is that Government spending is being cut because of the huge burden of unemployment. That is the result of the economic policies of the Chancellor and his predecessor. The infrastructure is crumbling. It should provide work for the unemployed, but we cannot afford to employ the unemployed to do the work which obviously exists because of the cost of keeping them unemployed.
It is the economics of bedlam and lunancy. The Budget is a wasted opportunity. It does not take up the challenge of expansion or seize the opportunities which lie ahead. It does nothing to ease the position of those who have been forced into unemployment, forced on to supplementary benefit or forced into poverty by the failure of the Chancellor's economic policies. The Government are not fiddling while Britain burns, but fiddling the figures while Britain sinks.

Mr. John Watts: The hon. Members for Great Grimsby (Mr. Mitchell) and for Stockton, South (Mr. Wrigglesworth) have in common an attachment to old-fashioned Keynesian economics plus a less attractive national characteristic, an unlimited capacity for national self-denigration. Their choice of statistics presented the performance of the British economy in the worst possible light. They utterly refused to recognise the realities of the achievements of the medium-term financial strategy—low inflation, sustained growth, rising living standards and a rise in employment.
The alliance conducts this orgy of denigration from a position of smug and cosy affluence. That is the epitome of the alliance person—those who have forsaken wife-swapping for fiscal flagellation with their masochistic opposition to reductions in income tax.
The Budget and the Finance Bill show that mixture of ingenuity and imagination which we have come to expect from my right hon. Friend the Chancellor. That is especially true of the package of measures which relate to small business and charities. I shall concentrate my remarks on those two aspects.
I welcome the decision to make the business expansion scheme permanent. My right hon. Friend the Chief Secretary set out, in his opening speech, the success of that scheme. That success is clearly recorded in the report prepared by Peat Marwick Mitchell. It has enabled small companies to raise risk capital. Amounts of less that £50,000 were raised by over half of the companies which took advantage of the scheme. The decision to make that scheme permanent underlines our determination to maintain a framework in which small companies can be formed and grow.
The extension of the loan guarantee scheme for a further three years provides loan capital for further expansion and that is welcome. In the past there has been a criticism of the level of premium charged and I am


especially pleased to see a cut in the premium from 5 to 2·5 per cent. I hope that in a future Budget it will be announced that this scheme is also to become a permanent part of the armoury of measures to assist small and medium-sized companies. The reduction in the small companies' rate of corporation tax to 29 per cent.—my right hon. Friend the Chief Secretary reminded us that it was 42 per cent. under the Labour Government—is a further measure that will assist the small company to continue to grow in profitability.
Therefore we have provided for the four ages of the small company—conceived by the entrepreneur, nurtured with risk capital under the business expansion scheme, funded through its adolescence by loan capital under the loan guarantee scheme and arriving at profitable maturity where not too much of its profit—certainly not as much as previously—will be taken away in taxation. There will be more retained profit to fund further growth.
The fifth age of the small business and, especially the family business, posed the greatest problems. There are an array of measures to help small businesses to become established and grow. However, family businesses, in their maturity, faced a severe dilemma because of the pernicious impact of the capital transfer tax. This tax made it difficult, if not impossible, for the business to be passed on to the next generation of owners and managers.
The abolition of capital transfer tax on lifetime gifts will be of great assistance to facilitate the orderly handover of ownership of a family business from one generation to another. The performance of family businesses, both in their investment record and in their return on capital, illustrates the desirability of finding the means by which they may remain in family control and not be forced by fiscal reasons to be floated or taken over by a conglomerate.
The measures contained in the Finance Bill provide a well-structured fiscal and financial framework to promote small businesses and their growth. However there remains a serious gap in the strategy. Many of the small and medium-sized businesses in my constituency do not look to the Government for handouts of taxpayers' money to support their growth. However, they are looking for more access to greater markets. The Government's expenditure on the purchase of goods and services for the current year will total £34·1 billion. Potentially that is a large market and one to which small and medium-sized businesses must have greater access.
To ascertain the extent to which Government procurement was providing contracts for small businesses I tabled a series of questions to the major Departments of State. I was disturbed to discover that the Ministry of Defence alone was able to give an adequate answer to a fairly simple question: "What is the value and what proportion of your expenditure on the purchase of goods and services provide contracts for small businesses?" With the exception of the Ministry of Defence the Departments replied that they did not keep records in a form which would enable them to answer the question.
The Department of Health and Social Security has £8·8 billion to spend, the Department of Transport has £2·4 billion to spend, the Department for Education and Science £2·3 billion. The Department of Education and Science did say that it intended, from next year, to maintain records which would enable it to identify its

contribution to small businesses. Even the Department of Employment, with its responsibility for the small business sector, was unable to do any better than provide the estimate that perhaps 10 per cent. of its purchasing was directed to small businesses.
This inability to identify the extent to which contracts are placed with small businesses suggests a lack of awareness of the need to take account of the needs of small businesses when determining Government purchasing policy. Until this deficiency is remedied a major gap will remain in our strategy for encouraging the development of small and medium-sized businesses.
The scathing and dismissive tone of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) concerning the impressive and imaginative measures to assist charities came ill from someone who was a member of a Government who did nothing to aid charities. Far from being a package designed in a desperate attempt to find something popular for my right hon. Friend the Chancellor to do—both the Bill and the Budget contained many other popular measures—it is but a continuation of the steady progress made in improving the tax environment for charities. First, there was the shortening of the term for covenants to four years. Then there was the restoration of higher rate tax relief within limits that will be abolished by this Bill. The sweeping reforms in the Bill place charities in the best position ever to obtain financial support from individuals and companies.
Like my right hon. Friend the Member for Worthing (Mr. Higgins) I believe that the payroll deduction scheme and the new arrangements for one-off gifts by non-close companies will prove to be especially valuable in providing opportunities for local charities to get support from local companies and their employees. Shortly I will be meeting the chairman of the Slough council for voluntary service to discuss how we can get together to ensure that charities in my constituency benefit to the maximum from this very generous reform of tax law for charities. Because of the imaginative and beneficial measures to which I have referred, and the others which time prevents me from referring to now, it will give me great pleasure and satisfaction to support the Second Reading of the Bill in the Lobby.

Mr. John Maples: It is disappointing that the Finance Bill does not deal with a fairly major reform of the income tax system. I suspect that the Government also find that disappointing, as it seems that it will take longer to bring that to fruition than might have been hoped.
We have had a Green Paper on personal taxation. It is very interesting, but it basically contains only one idea. It is also in danger of pre-empting the debate on tax reform. Perhaps that is what it was intended to do. Major reforms of the income tax system, probably come only once every 30 or 40 years. They thus warrant a very wide-ranging debate on the different possibilities for reform. I shall outline some of the major problems. First, income tax starts at far too high a rate. People pay no tax and then face a 29 per cent. cliff. In that respect, we are out of line with our EEC partners, where the starting rate for tax ranges from between 7 and 22 per cent.
It is also argued that people in Britian start paying tax too soon and at too low a point on the income scale. In that respect, we are not out of line with the EEC, but we are


above average. In any event, it is a subjective judgment. However, it seems to have had great influence on Government policy, which has been substantially directed towards raising tax thresholds, on the argument that that takes people out of tax and helps with the poverty trap. The argument that it takes people out of tax is difficult to sustain. I suspect that when the threshold is raised, they go out of tax, but when they receive a pay rise, they are taxed again. Moreover, those helped are seldom families with one relatively low earner, yet that is where poverty tends to occur. It is difficult to argue that raising tax thresholds helps with the poverty trap. If that trap is to be solved by tax thresholds, the threshold for a married man must be raised to about £5,000. That would obviously be expensive.
The proposals in the Green Paper would achieve that aim by raising the combined threshold to about £6,000. I should be interested in the response of the Minister, but the argument that one can take people out of the poverty trap by raising thresholds is surely overtaken by the proposed reforms to social security. If housing and family credit are to he based on after-tax income, no amount of fiddling with the tax threshold or with tax rates will make much difference. A person's family credit or housing benefit will simply be adjusted in terms of his after-tax income. Raising thresholds after the social security reforms have been brought into operation will have no effect at all on the poverty trap.
It is true that tax is relevant to the unemployment trap, but it is the average rather than the marginal rate that is relevant. One can deal with average rates just as well by dealing with the basic rate of tax as by raising thresholds. The basic and fundamental problem with our income tax system is that, while we have very high marginal rates for almost everyone, ranging from 29 to 60 per cent., we have relatively low average rates of tax. The percentage of income that a person on three quarters of average earnings would pay in income tax is only 15 per cent., but they face a marginal rate of 29 per cent. Someone on average earnings of £10,000 a year would pay an average of 18 per cent., but would face a marginal rate of 29 per cent.
That is built into the system because there are so many deductions. It has bad consequences. It is bad for incentives higher up the scale. It is bad because it promotes the black economy and a general indulgence in too much tax avoidance and tax evasion. It has a serious impact on the present structure of the poverty trap, and has serious repercussions on pay bargaining, because it costs an employer about £1·80 to put £1 net in his employee's pocket.
The reason for very high marginal rates as against low average rates is that about half of personal income is not taxed. The majority of the part that is not taxed is made up of personal allowances. The Green Paper attempts to deal with some of these problems. It deals with the poverty trap in its present form, but after the social security reforms have been made, in those cases where the benefits are based on after-tax income, raising the tax thresholds will have little if any effect on the poverty trap. The Green Paper largely deals with the unemployment trap, but that could be dealt with just as well by reducing the basic rate as by raising the thresholds. The other major reasons given in the Green Paper are the enhancement or promotion of privacy and independence in the case of married women

dealing with their tax affairs, and the need for help for the low paid, particularly when a woman ceases work to have her first child.
Those are laudable objectives, and the idea is attractive. However, it would cost £5·5 billion to raise the single transferable allowance to nearly £3,000. 1 should have thought that if we had £5·5 billion to play with—if that is the right word—in the tax reform game, many other reliefs and privileges could be bought with the money.
We could solve the problem of the separate taxation of husband and wife relatively cheaply. We could help low-paid couples relatively cheaply, perhaps through social security benefits. There would still be a lot left over to help with other tax reforms. The problem at the lower end of the tax scale is that people are left with too little money in their pockets, because they have paid too much tax, or do not receive enough social security benefits. But higher up the tax scale the problem is the marginal rate and its disincentive effect. Raising thresholds does not meet both those objectives. The best way of helping the low-paid is to deal with that problem through employees' national insurance contributions. That would focus the money on the low-paid, giving them the relief without having to give it to everybody else.
If my calculations are right, we could abolish the 5 per cent. band on employees' contributions at a cost of only £130 million. That would be a cheap way of focusing help on the low-paid without having to give that relief to everyone else. Once one has dealt with that, there are considerable attractions in an alternative approach to tax reform. Paradoxically, we could abolish personal allowances and tax every pound of someone's income form first to last. Although total personal income in the United Kingdom in 1984 was £200 billion, the revenue from income tax was only £35 billion, or 17·5 per cent. Most people would think that that percentage was much higher. It demonstrates the problem of the high marginal rates and the low average rates.
If we took £5·5 billion off the total that could be raised in income tax, which is the amount that we would have to spend on implementing the Green Paper's proposals, we would have to raise only £30 billion. On my calculations, one could do that with a basic rate of 10 per cent. payable up to average earnings, and 20 per cent. payable up to twice average earnings, with a maximum rate of 30 per cent. thereafter. Obviously, there would be no personal allowances reducing the amount of income that is taxed.
I should have thought that it would have a dramatic effect on incentives higher up the income scale, on the black economy, and tax avoidance and evasion, if people faced only a 10 or 20 per cent. tax rate rather than a 30 or 40 per cent. rate. It would also have a very dramatic effect on the poverty trap, and a far more dramatic effect than most of the tax threshold-raising that we have been able to afford. I suspect that it would make tax far cheaper to collect. There would, of course, be problems with mortgage relief and pension contributions, but I do not wish to enter what has proved to be a political minefield for all political parties. However, those could either be left in as deductions or rectified by some compensation.
Some working wives would lose if such a proposal were adopted. The biggest problem is that the low-paid would be left worse off in such a system. The break-even point is about £6,000 a year, which is considerably below average manual earnings, and the maximum loss is just over £4 a week. We could make up that loss to the people


affected through the social security system by way of housing benefit or family income supplement, that would enable us to introduce a tax system with much lower marginal rates. That is an attractive option and I am sorry that the Government seem almost entirely hung up on a threshold approach to tax. We had that for several years in a row and I thought that this year when the basic rate was reduced and the thresholds were not over-indexed we had got away from that approach. However, the Green Paper suddenly takes us back to it.
I am anxious to see that we do not enter into major reforms of the income tax system with only one idea in the bag. The debate should be much wider and should examine all the alternatives, of which I have outlined just one. My right hon. Friend and the Government, and all of us on the Government side, ought to find the proposition for a tax system with a basic rate of 10 per cent. and a maximum rate of 30 per cent. attractive to taxpayers and beneficial to the economy.

Mr. John Butterfill: Time is pressing, so I shall endeavour to be brief. I listened to the description by Opposition spokesmen of the British economy and I find it difficult to recognise it from that description. It is not the same economy as that which is seen by independent observers like OECD and certainly it is not the economy that I recognised when I was recently in the United States and heard the way we were considered by investors there.
The dramatic improvements in the British economy in the last few years are due almost entirely to the imaginative approach to budgetary matters taken by my right hon. Friend and the other members of the Treasury team. The business expansion scheme is one of the most creative measures that any Government have ever introduced and will continue to provide enormous help to young and emerging industries.
I am worried about one of the proposals in the Finance Bill. Hon. Members will be aware of my interest in tourism and leisure, and the Finance Bill contains a proposal to limit or to exclude from the business expansion scheme companies whose net asset backing exceeds 50 per cent. I admit that there have been considerable abuses of the scheme by certain property companies and by companies of that type with high asset backing.
However, in dealing with covered sports centres or leisure centres a problem arises. At the moment the rules lay down that anything that is added to the land, and would normally be thought to be annexed to the land, should be included in the computation. There is no doubt that the provision of such a facility carries a high risk. I hope that it will be possible for my right hon. Friend to consider some amendment in Committee.
I welcome the considerable benefits that clauses 26 to 30 confer on charities. Those benefits have already been dealt with by other hon. Members so I will not go into them in detail. However, it would be churlish to ignore the other changes about charities made in the Budget, especially the VAT changes. These give enormous benefit to charities that provide for the blind and provide medical services.
I should like to quote from a letter sent to me by a charity with which I have been closely associated for some

years. It is the People's Dispensary for Sick Animals, which wrote to me immediately after the Budget. The general secretary said:
What about the Budget then! As far as we can see, our prayers have been answered and we shall henceforth no longer pay VAT on our drugs … Thank you approximately 150,000 times—that's the amount of VAT which we shall save annually on drugs alone!
The Government have not received in the press and elsewhere all the credit they deserve for that particular measure.
Small firms will be particularly grateful for the changes in the rules for capital transfer tax, now to be known as inheritance tax. However, there remains a serious obstacle in capital taxes—capital gains tax. Although it is possible to transfer from one generation to another without incurring capital transfer tax, that transfer will still trigger capital gains tax, which in itself imposes a considerable obstacle to the continuation of small family businesses. The problem with CGT is that it is not so much a tax on true gains as a tax on inflation. That seems to be fundamentally wrong. My right hon. Friend the Chancellor of the Exchequer moved some way in that direction by providing indexation from a base a few years ago. In future, I hope that he may feel able to go further and to remove altogether the purely notional gain that arises from the effect of inflation.
Finally, I congratulate my right hon. Friend because if one thing always makes his Budgets stand out, it is his imaginative approach to problems. We have seen from the success that we have had in housing and the sale of council houses how the growth of home ownership has changed the perspective of great sections of our community. To attempt now through the personal equity plan to extend that to stocks and shares is creditable. A number of hon. Members have pointed out that the scheme as conceived may not be perfect. Indeed, it may be capable of improvement. I hope that I shall be asked to serve on the Standing Committee, and that we shall attempt constructively to improve the scheme. At the same time let us give it enormous credit as being an imaginative measure which may possibly transform the face of British society.

Mr. Terry Davis: We have had an interesting debate about a most uninteresting Bill. The gap between the Conservative party and the Labour party in our discussion and analysis of the economy, our approach to economic policy, and even our identification of the most important economic issues has shone through the debate.
I listened to all the speeches from Conservative Members, and two points struck me. First, not even the Government's most fervent, loyal supporters, including the right hon. Member for Worthing (Mr. Higgins), could bring themselves to suggest that the Bill was anything other than an exercise in marking time. It is an exercise in waiting to see which way the price of oil will move, which way the exchange rate will move, what will happen to the balance of payments and, above all, in waiting for next year, for an election Budget and an election Finance Bill through which Conservative Back-Bench Members hope to save their seats.
Secondly, the Bill marks the end of the Chancellor's pretensions to be a reforming Chancellor of the


Exchequer. Two years ago the right hon. Gentleman was cast as the Rambo of the Exchequer, machine-gunning his way through the jungles of taxation to rescue working people. Of course, it was never true. His role was really that of a latter-day Neville Chamberlain, the man who personified non-intervention, because that is what fiscal neutrality is and always was. It means that working people are left at the mercy of market forces in an economic jungle which the Chancellor's friends in the City of London exploit to their own advantage.
Now all those pretensions of two years ago have been exposed: 1984 was a one-off Bill from a one-Budget Chancellor. Two years later what we have is a mish-mash of odds and ends. In short, this year's Finance Bill is a boring Bill and hardly worth a day in the life of the House of Commons.
It is also an irrelevant Bill because it does almost nothing about the biggest economic and social problem of our time, unemployment and the poverty associated with unemployment, retirement and looking after children.
At no time in his speech did the Chief Secretary mention poverty. It took him more than half an hour to get round to unemployment. However, that was better than most of his hon. Friends, who made no reference whatsoever to unemployment or to the plight of the unemployed.
I can only deduce that all the Conservative Members who have taken part in the debate recognise that, as the Chief Secretary put it in his reference to home owners, the unemployed have no direct interest in this Bill. The Chief Secretary frowns, but that was the phrase that he used. He said that home owners had no direct interest in the Finance Bill, unlike all those bodies listed by him—the stock exchange, the other financial institutions, the businesses, large and small, which have, to the surprise of no one, not even the Chief Secretary, welcomed the Budget.
Of course they have welcomed it. The Budget was their Budget and the Finance Bill is their Bill. It is not a Bill for the unemployed. That was shown most vividly this afternoon when the Chief Secretary eventually spoke about unemployment. As Hansard will show tomorrow, he was ruled out of order because there is nothing in the Finance Bill, in the opinion of the Chair, to reduce unemployment.

The Chancellor of the Exchequer (Mr. Nigel Lawson): What?

Mr. Davis: The Chancellor of the Exchequer must have been absent at the time and missed the speech of his right hon. Friend. When he looks at Hansard tomorrow, he will see that his colleague was ruled out of order.
The Chief Secretary, like other Government spokesmen, prefers to talk about the figures for employment rather than those for unemployment.

Mr. Forman: The hon. Gentleman has mentioned the connection in his mind between unemployment and the Budget. Since the Finance Bill is, as he knows, the legislative consequence of the Budget, and since the Budget, in its prudence and general approach, was one of the preconditions for the subsequent two points fall in standard interest rates, is that not one of the most important contributions to solving unemployment in this economy?

Mr. Davis: I agree with the hon. Gentleman that a reduction in interest rates will have a beneficial effect on both employment and unemployment. Where we may

differ is in our attribution of that fall entirely to the Budget. There were other reasons. Interest rates were going to come down before the Budget. They are at the moment being held artificially high, if we are to believe the press, by the Bank of England, and I assume that the bank talks these days, post-Johnson Matthey, with the Chancellor of the Exchequer.
The Chief Secretary preferred to talk about the figures for employment rather than those for unemployment. I can understand that emphasis. Government spokesmen always want to tell us that more people are employed today than were employed a year ago and that more people are employed today than were employed in 1983. Today was no exception. The Chief Secretary gave us a new figure. He claimed that 1 million new jobs had been created since 1983. I am not sure how that figure has been calculated. It does not seem to have been included in any statistics published by the Department of Employment.
The most recent statistics published a fortnight ago do not justify the claim of 1 million new jobs since the general election. I realise that Lord Young issued a press release on the same day that the figures were published and claimed that an increase of 276,000 jobs in 1985 meant that the increase since March 1983—not since the general election—was almost 1 million. If the Government want to make such claims, they should first publish the detailed figures. Otherwise, they will be treated with suspicion in the House and elsewhere.
But there are more important points to be made about the Government's claim of an increase in employment. There are four things that Government spokesmen do not tell us, four things that the Chief Secretary did not mention this afternoon. The first is that when the Government refer to the number of people in employment, they often include people who are involved in Government employment schemes and training schemes. They include people on the youth training scheme and the community programme. I do not necessarily object to that approach because the Labour party believes in job creation measures, but it really is a bit thick for Government spokesmen to give the impression that those new jobs have been created by the economy rather than the Government.
We want to see more jobs created by the Government, and we take pleasure in the fact that some 350,000 people are counted—when it suits the Government—as employed as a result of job creation measures. But what was their position in 1979? Then the Prime Minister referred to real jobs, and she was not including those jobs covered by Government schemes.
Secondly, much of the increase in employment in the past two or three years has taken place in part-time jobs for women, as my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) reminded the House this afternoon. Again, the Labour party does not object to an increase in part-time jobs for women, but let us be clear about why the number of those part-time jobs is increasing. It is increasing, has increased and will continue to increase as a direct result of the high rate of unemployment. More and more married women are having to seek employment in order to support their families, and the only jobs that are available to them are part-time jobs.
In fact, the increase in the labour force mentioned by the hon. Member for Bournemouth, West (Mr. Butterfill) is also due, in part at least, to the increase in unemployment. The Government's supporters talk about


the increase in the labour force as if it were the same thing as an increase in the population or the working population. That is not true. The increase in the labour force is measured as an increase in the number of people who are looking for work. If more married women are having to go out to work to support their families, they are counted as an increase in the labour force. That is where the statistic comes from.
The third point which is ignored by the Chief Secretary and other Government spokesmen in the House and elsewhere is that the figures published by the Department of Employment a fortnight ago show that the increase in employment is slowing down and has slowed down for the past year, despite the so-called "Budget for jobs". Indeed, the increase in jobs last year was down by one quarter compared with the increase in the previous year. There was an especially marked reduction in the number of new self-employed jobs—jobs which the Prime Minister has always boasted about—but the important point is that the total is going down; the rate of increase is declining.
Incidentally, the figures also show that not only is unemployment rising but that it has risen more quickly in recent months than a year ago. The rate is now twice that of a year ago. The Department of Employment's published figures show that during the past six months the increase in unemployment has averaged 12,000 people a month and a year ago, over a period of six months, the increase was an average of only 5,000 people a month.
There is a fourth point which the Government often omit or blur over. We now have the preliminary results of a labour force survey of one year ago.

Mr. Higgins: As the hon. Gentleman was arguing 10 minutes ago that it was out of order to discuss employment, why has he spoken about nothing else since?

Mr. Davis: I am responding to the claim made by the Chief Secretary, which was found to be in order, of the increase in employment in the last three years, and I am commenting quite properly on what the Chief Secretary said. It is, I think, at the discretion of the Speaker whether I am in order. It was not my decision that the Chief Secretary was out of order but the Chair's decision, because, in the judgment of the Chair, there was nothing in the Bill to help the unemployed.
To revert to the labour force survey and the preliminary results published one week ago, the figures show that in this country there are 755,000 people with second jobs. Although those second jobs are excluded from the statistics published in the survey, they are not always excluded from statistics published in the Department of Employment Gazette, as I understand it.
I ask the Chief Secretary to tell the House how many of the 1 million new jobs created since 1983 are second jobs—that is, jobs being done by people who already have a job. To what extent are the so-called new jobs represented by people who are working in the evening or at weekends in public houses? To what extent are they married women who go to work in a local shop on a Saturday? To what extent are they made up, for example, of people such as the man who works in the factory and goes to help in the local bookmaker's on a Saturday afternoon and is classed as having a second job? That is

not an increase in employment to be put against the increase in unemployment that we have witnessed for the past seven years.
To be more specific, when the Department of Employment calculates an increase of 276,000 in the number of people in employment in 1985, does the Department include the estimated increase of some 80,000 second jobs a year? Those second jobs do not represent any increase in the real number in employment by any yardstick applied in the real world.
The Government have made so many changes in the way that the employment and unemployment figures are calculated that hardly anybody trusts the statistics any more. A more suspicious man would suggest that the Government change the figure so often to prevent any accurate analysis of their record. But what they cannot deny is that more people are unemployed today than were unemployed when they came to office in 1979. They cannot deny that more people are unemployed today than when we reached the so-called bottom of the recession in 1981. They cannot deny that more people are unemployed today than when they were re-elected in 1983. They cannot deny that more people are unemployed today than when the House debated the Finance Bill one year ago—a Bill which represented a Budget for jobs.
It is a fact that unemployment was too high when the Government took office in 1979, but it was coming down and it had come down for several months in succession. Since 1979, it has not only increased but trebled, and shows no sign whatsoever of coming down. And on the basis of evidence along the lines of the dog that did not bark, it is clear that the Government do not expect any significant reduction in unemployment this year. Treasury Ministers have been asked time and again, but on each occasion they refuse to give the figures. They can give forecasts for inflation, for capital investment, for domestic demand and gross domestic product; they can forecast exports and imports and the balance of payments; but they cannot forecast employment or unemployment.
Why are the Chancellor of the Exchequer and his colleagues so coy? They must have produced a forecast; they must have it in the Treasury. Are they really pretending that civil servants do not have the time to do this calculation, civil servants who, each Monday morning, are given a clutch of press cuttings by the Chancellor and his Chief Secretary to estimate and calculate figures to show the cost of my hon. Friends' commitments, hopes, ideas, suggestions and long-term aims? The Chancellor of the Exchequer smiles. We know what his weekend reading is. He reads Tribune. Each week he takes cuttings from Tribune, gives them to the civil servants on the Monday and asks them to work out what it would cost to implement Labour's plans. I suggest that he uses some of the civil servants' time to forecast unemployment and the cost of the Budget and the Finance Bill. If the Treasury forecast showed any reduction in unemployment, the Government would not be so coy. That is proof enough that the Finance Bill will not reduce unemployment.
Perhaps it is worth reminding ourselves that it is not only the waste of resources in paying men and women to sit at home instead of paying them to provide goods and services—particularly services—that the rest of the community needs, but the sheer poverty associated with being unemployed that concerns Labour Members. Of course, the best answer to that poverty is to get people


back to work, and that is why the Labour party has set itself a target of creating 1 million new jobs during the first two years of the next Labour Government.
However, that is not the complete answer, because I million new jobs will still leave thousands of people unemployed and living in poverty. We shall therefore pay the long-term rate of supplementary benefit to the long-term unemployed, because the long-term unemployed are one of the three groups to whom we shall give the greatest priority in our campaign against poverty: the long-term unemployed, the pensioners and parents—single parents and married couples, working parents and unemployed parents. These are the people to whom we shall give priority, not because other people are not living in poverty but because they are living in the greatest poverty and must therefore come first.
What is the response of the Chancellor and the Government to the scourge of poverty? After a careful examination of the Bill, I can find only one section that, by any stretch of the imagination, could be described as alleviating poverty. That section consists of the clause relating to charities. As my right hon. Friend for Sparkbrook explained, we welcome the provisions in so far as they benefit real charities, but look at how much the Chancellor proposes to devote to this much-vaunted scheme. On the most generous calculation, in his Red Book, the Chancellor is giving £55 million a year in tax relief on gifts to charities, adding the provision for gifts by employees and companies together.

Mr. Lawson: What did the Labour Government do for charities?

Mr. Davis: We did not abolish the capital transfer tax, and it just happens that £55 million is also the cost of abolishing the capital transfer tax on gifts from the rich to the already wealthy. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) pointed out, that is one of the most objectionable provisions of the Bill.
My right hon. Friend the Member for Bristol, South (Mr. Cocks) and my hon. Friend the Member for Knowsley, South (Mr. Hughes) summed up the Bill. My right hon. Friend described it as a Bill that does not measure up to what is required. My hon. Friend described it as irrelevant, and he was right. Compared with the scale of the problems of unemployment and poverty, the Bill is irrelevant and inadequate—as irrelevant and inadequate as the Government. It is a defeatist Bill from a defeated Government—defeated not in the Lobbies but in the country—defeated by the problem of unemployment, and a Government who will be defeated in an election that not even this Government can avoid for ever.

The Financial Secretary to the Treasury (Mr. John Moore): I start by making it clear to those hon. Members who have not been here throughout our proceedings, and who may have been out enjoying themselves, what precisely the Chair did not rule today. My right hon. Friend the Chief Secretary was rightly discussing aspects of the Finance Bill and of the Budget in relation to unemployment. In its wisdom—the Chair is always right—the Chair ruled that the specific budgetary measures on unemployment that are not in the Finance Bill should not be addressed, and my right hon. Friend immediately responded to that.
I go beyond that to the speech of my hon. Friend the Member for Surrey, North-West (Mr. Grylls). He was supported by all the Opposition parties on an issue which unites both sides of the House—unitary tax. He asked some important questions on this all-party issue. I shall reiterate the Government's position. The timing has not changed. The Government would have wished for greater progress by now, there is no doubt about that. He asked what Ministers would and could do to assist progress in this matter. Ministers have and will continue to take every opportunity to raise the matter of unitary tax with the United States. He commented on the role of the unitary tax group. I join him in paying tribute, on behalf of both sides of the House, to the activities of the Unitary Tax Group, to the Confederation of British Industry and to Peter Welch for mobilising British industry. As my hon. Friend rightly said, the Government have fought against unitary tax in every way possible.
Those of us who were privileged to hear the speech of my right hon. Friend the Member for Guildford (Mr. Howell) regarded it as lucid and fascinating. I listened with great care, as I am sure all right hon. and hon. Members did—[Interruption.] I listened as I have throughout the debate, unlike those who have not been present throughout but seek only to interrupt from a sedentary position. I listened, not only because of my right hon. Friend's former role as Secretary of State for Energy but because he was in advance of most of the world in predicting recent changes. Therefore, we are obviously conscious of his remarks. He went on to discuss other matters, including monetary policy. As my right hon. Friend the Chief Secretary said, the Government will respond to the Treasury and Civil Service Committee recommendation which many of my hon. Friends have commented on.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, made a wide-ranging and interesting speech. I listened with considerable care to his remarks about privatisation. He well knows that we beg to disagree. This is probably not the occasion on which to debate that particular issue except to say, with respect, that I think that he confuses ownership with regulatory needs.
The right hon. Member for Ashton-under-Lyne also raised the issue of capital transfer tax. It has been raised by other hon. Members during the debate. I can assure him, provided the House agrees, that there will be an opportunity to debate that in detail in a Committee of the whole House, without, as he rightly says, being trapped in the rigours of the Finance Bill Standing Committee. We welcome his comments, as well as those of my hon. Friend the Member for Surrey, North-West (Mr. Grylls) and my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), who expressed a contrary view and said that that part of the Finance Bill was one of the critical features of my right hon. Friend the Chancellor's Budget.
I was sorry to miss the contribution of my right hon. Friend the Member for Worthing (Mr. Higgins) when I disappeared from the Chamber for a few moments. I would be doing the House a service if I drew to the attention of those hon. Members who were not here the question that my right hon. Friend legitimately put to the hon. Member for Stockton, South (Mr. Wrigglesworth), who made pious comments on the nature of the supposed courage of the alliance in voting against the reduction in income tax to 29 per cent. My right hon. Friend the Member for


Worthing legitimately asked whether that vote would be a prime plank in their by-election programme at Ryedale and West Derbyshire. I trust that the limited presence of the alliance will not restrict it from ensuring that all the people involved in the by-elections will be well aware of the nature of that vote.
The alliance parties are again sadly without representation, except for the hon. Member for Stockton, South who was unable to be with us for the remarks of my hon. Friend the Member for Tatton (Mr. Hamilton). He gave a devastating analysis of the conflicting nature of the alliance's programme. [Interruption.] The alliance should carefully consider my hon. Friend's points, as some alliance Members were not present to hear his speech.
I welcomed the emphasis which my right hon. Friend the Member for Guildford placed on the Treasury and Civil Service Committee's verdict which came out categorically in favour of the Budget.
The right hon. Member for Bristol, South (Mr. Cocks) legitimately raised, in the special way to which we have all become used over many years, the interests of his constituents, especially in relation to tobacco. I am sure that if we have the privilege of his company in Committee, we shall look forward to his individualistic comments, which will help our deliberations. The right hon. Gentleman will in no way mind the compliments which I have paid him, and which I meant, for the way in which he has consistently argued for the interests of his constituents throughout his long and distinguished career in the Palace.
The remarks of my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) were especially welcome. As always, he made a wise and balanced contribution. I was especially interested in his remarks on wider share ownership for employees—[Interruption.] I have listened to the debate and am now trying to respond to the specific points that were raised. Those hon. Members who, unfortunately, have not had the pleasure of being present will have no knowledge of what occurred during the debate.
I accept the point made by my hon. Friend the Member for Carshalton and Wallington about employee share ownership, although I do not agree with him that our other activities in the area of direct share ownership would divert us from our stated aims in the Budget.
I was especially unhappy—as was my hon. Friend the Member for Slough (Mr. Watts), who robustly criticised it—with that section of the speech of the right hon. Member for Sparkbrook which related to charities. The right hon. Gentleman welcomed part of our charity package. However, he made a relatively miserable response when he sought to suggest that our proposals on charities were simply an alternative to what in his judgment was a disappointing Budget.
The right hon. Gentleman's remarks were interesting. Should there come the benighted time when a Labour Government are in office, those outside the House will wish to examine carefully the extraordinary statement which the right hon. Gentleman made across the Dispatch Box. He said that the Labour Government would redefine the word "charity"—in those lovely Socialist words—to establish who is genuinely deserving. The analysis of that statement, after generations of charity law, will be interesting to consider.
The right hon. Gentleman asked a specific question about pension scheme surpluses, and I was delighted at the thrust of his first remarks. He said that he welcomed the thrust of the proposals and thought that they were correct. He will understand why we could not consult the actuarial profession generally on the details before the Budget. Therefore, on the advice of the Government Actuary, we adopted a careful and prudent approach.
The right hon. Gentleman specifically asked about the 5 per cent. level. The approach advised by the Government Actuary has three related elements. The first is the secure funding method, which is known among actuaries as "projected accrued benefit", and associated with that is a series of prudent actuarial assumptions on which the liabilities are assessed. Secondly, the contingency margin of 5 per cent. which has been allowed was advised on the basis of the secure funding method and the prudent actuarial assumptions that that would safeguard the benefits given to scheme members.
Thirdly, and related to that, are the three options for the funds to reduce the surpluses: contribution holidays or reductions for up to five years, improvements in benefits, and a refund to employers. The right hon. Gentleman focused on the 5 per cent., but one cannot look in isolation only at one element. We are consulting the actuarial profession. We shall also listen carefully not only to what the right hon. Gentleman said, but to views from outside Parliament.
I return to the right hon. Gentleman's fundamental point, referred to by other hon. Members, in particular by the hon. Member for Great Grimsby (Mr. Mitchell) and by my hon. Friends the Members for Tatton and for Lewisham, West (Mr. Maples). They went to the heart of the Finance Bill and to the Opposition's attitude to the taxation of both capital and income.
A great deal of the debate both inside and outside Parliament has been about the Opposition's suggestion that the Government's programme will benefit only the rich and that most of the Government's measures can be corrected by changing the pattern of taxation. I shall deal tonight with the analysis introduced into the debate by the right hon. Member for Sparkbrook. I do not intend to deal with the Opposition's expenditure programme. I shall concern myself only with the suggestion of the right hon. Member for Sparkbrook that they will implement a minimal programme.
On the Jimmy Young programme on 20 March the right hon. Gentleman referred to a £3·6 billion anti-poverty progamme. My hon. Friends have asked me tonight, who are the rich, and how will they pay for this programme? The answers then become rather vague and indistinct. I shall remind the House of the nature of the questions. The right hon. Gentleman seeks to suggest that the financing of the Labour party's minimal programme will be simple and easy, and this was a fundamental part of our debate. Jimmy Young said:
When you say rich, Roy, you mean, who's rich? I mean, what income are you talking about?
The right hon. Gentleman said:
It's people earning more than £25,000 a year.
Jimmy Young then said:
Now I've got four figures there.
I am told on the Jimmy Young programme by the right hon. Member for Sparkbrook that in fact it is very hard to analyse because the Treasury will not provide all the details. Therefore I shall help the right hon. Member for


Sparkbrook and will give him all the details relating to his programme. He asked a second question that I shall also seek to answer. It related not only to the rich but to how they will pay. Jimmy Young said:
When you say tax them properly, what sort of level would they be paying tax then?

Mr. Stuart Bell: On a point of order, Mr. Speaker. This is not a question of the Jimmy Young show but of "Desert Island Discs." We have already heard this speech from the Chancellor of the Exchequer.

Mr. Speaker: The right hon. Gentleman is making his speech in his own way.

Mr. Moore: Thank you, Mr. Speaker. Truth is always difficult to take.
The second leg of the question that is critical in this area is how the rich will pay. In this instance, the tax level will not change very much, we are told by the right hon. Member for Sparkbrook, because it will all be collected in the form of capital taxes. Let us look at the implications of this proposal before I remind the right hon. Gentleman and the House of how this Finance Bill will continue the process of making everybody, at all levels of income, better off than if we still had to face the hazards and the tragedy of a Labour Government.
As for capital taxes, with which we are dealing in this Finance Bill, let me examine arithmetically what would happen if we had to return to the 1979 position. There are three features of this Finance Bill and of previous Finance Bills to which the right hon. Member for Sparkbrook objects: abolition of investment income surcharge and reductions in capital gains tax and capital transfer tax. If reinstated, what would they produce annually? Investment income surcharge would produce £825 million a year and changes in capital gains tax and capital transfer tax would produce £835 million a year. That is a total not of £3·6 billion but of £1·6 billion.
As the Finance Bill deals with matters such as CTT, it is worth making some points on the effects of the arithmetic. If investment income surcharge were reinstated, it would penalise many who are on the basic rate. More than 60 per cent. of taxpayers who would be affected are those on the basic rate, and 45 per cent. of those affected are elderly. The approach which I hear outside is: "the bloody rich." Because of the reductions in the absurd rate of capital taxes, it is worth drawing attention to the effect of this arithmetic. Our much-improved investment planning has produced a yield of 20 per cent. more, in real terms, from capital taxes since 1979, as my right hon. Friend the Chancellor said in the House on Monday 24 March.
If we returned to the rates that applied in 1979, it is questionable whether they would produce what the right hon. Member for Sparkbrook wants—a yield of £1·6 billion. Let us accept, for a moment, his arithmetic and consider the reality of income tax and the implications at which he laughed earlier. The reality of income tax, in addition to restoring IIS, CTT and CGT reductions, is slightly more complicated. I understand the right hon. Gentleman's difficulty when he appeared on the Jimmy Young show regarding the different allowances and the problem whether one is referring to a single person, a one-earner married couple or a two-earner married couple.
The public want to know the implications of this and previous Finance Bills and the policy of the right hon.

Member for Sparkbrook as adduced at the Dispatch Box today. Let me tell the country what his policies would mean. To finance this minimal policy, there would be a jump in the income tax rate of single people to 70 per cent. on taxable income above £18,600, or 70 per cent. on all gross income above £20,935. That is the first definition. The right hon. Member for Sparkbrook is getting very uncomfortable, because this is the first time we have analysed his definition of "rich singles".
What about the one-earner married couple? Again, there would be a jump to 70 per cent. tax on all taxable income above £18,600, or such a couple would pay 70 per cent. on a gross income above £22,255. I remind the outside world of the right hon. Gentleman's definition of rich. According to him, a rich one-earner couple is a couple earning £22,255. Let us remember those figures.
I turn to the critical, final figure—that relating to two-earner couples. There are over 5 million two-earner couples. All two-earner couples would jump to a tax rate of 70 per cent. on a taxable income of £18,600, or would pay 70 per cent. on all gross income above £24,590. The right hon. Gentleman's definition of a two-earner couple would be a husband and wife, each earning about £12,500. That is his definition of the rich.
I have explained who these rich people are. I have explained how they will pay. They are not even in the top 5 per cent. of salary earners. For the benefit of the right hon. Gentleman, when he next appears on the Jimmy Young programme, those people are the top 3·5 per cent. of tax-paying units—not the top 5 per cent.
From the Alice in Wonderland of "Hatteromics", I turn to what the present Finance Bill and other Finance Bills have done since 1979 for the other side of the challenge, as opposed to that absurd pretence that the programme can be financed out of thin air. The other side of the issue concerns what we have done about the burden of tax and the well-being of people at all levels of tax. We had to get control of borrowing. We had to pay the terrifying burden of debts before we reduced the burden of taxes.
The right hon. Member for Sparkbrook was right—some taxes have been increased. North sea taxes have increased. About 40 per cent. of the increase in the tax burden has come from North sea taxes. Equally, VAT has contributed to the increase since 1979 by a little more than 40 per cent. The remaining 10 per cent. plus has come from national insurance charges, which have increased benefits associated with them, and from rates.
In this pattern of Finance Bills, which culminate in this legislation, the fact that many critical taxes have decreased has not been discussed. I refer especially to the taxes on employment. When the Conservative party came to office, the burden of taxation borne by employers was 14 per cent. Primarily because of the abolition of the Labour tax on jobs, that burden has been reduced from 14 per cent. to 9 per cent. Income taxes have fallen. In 1978–79, income taxes were approximately 32·7 per cent. of total taxation. They have now fallen to 26·9 per cent.
The right hon. Member for Sparkbrook specifically asked me what that has meant to taxpayers generally. What has the pattern, which has continued in the Finance Bill, meant? [Interruption.] To help the right hon. Gentleman's supporters, I shall compare the income tax and national insurance contributions paid by a married man under the Conservative Government, with his position if Labour were still in office. [Interruption.] I know that, to some people, that is a terrifyingly long and


happy way in the past, but I remind the House of the precise figures. Under our present tax regime, a married man on a third of average earnings pays 7·4 per cent. of his income in income tax and NIC. Under the 1978–79 regime, under Labour and including the benefits of Labour's 6·5 per cent. NIC, such a person would pay 10·6 per cent. in income tax and NIC—higher than the 7·4 per cent. paid under the present tax regime.
For a married man earning half average earnings, the figures are precisely the same—18·9 per cent. at present versus 18·9 per cent. under a 1978–79 regime. For a married man earning three quarters of average earnings, the figures are 25·3 per cent. under our Government and 25·8 per cent. under Labour's 1978–79 regime with its lower NIC rates. The position today in terms of the combination of income tax and NIC is better than under a 1978–79 regime.
A married man on average earnings pays 28·5 per cent. in income tax and NIC but would have paid 29·2 per cent. under the Labour's regime—again a higher figure. A married man earning one and a half times average earnings pays 30·6 per cent. under this Government but would have paid 31·1 per cent. under a Labour regime. I could continue, because obviously the figures become even better. In every instance, the figures are better or the same. That therefore disproves the constant suggestion of the right hon. Member for Sparkbrook that in income tax and national insurance terms, people are worse off than if Labour had remained in office.
I have said repeatedly at the Dispatch Box that we should be concerned, as the right hon. Member for Sparkbrook said, not simply with the proportion taken in tax but with how well off people are, because that is obviously affected by the pattern of their earnings increases as well as the pattern of taxation changes. I shall take the categories I mentioned and the percentage change in real take-home pay. After all, that is what, theoretically, we are all concerned about when we talk about our constituents.
Let me remind the House of the figures on the percentage change in real take-home pay. Under the category of those on half average earnings I can quote any group—single, married with children, married with no children. Under the category of those married with no children, there was a 2·4 per cent. improvement in a couple's real take-home pay after five years of Socialism, but after seven years of Conservatism there was a 14·8 per cent. improvement. [Interruption.] The debate is about whether people in work are better off, and I am simply trying to remind the House of the data.

Mr. D. N. Campbell-Savours: rose—

Mr. Moore: I will give way only to those who have participated throughout the debate.
The figures continue, and they get better. [Interruption.] The Opposition do not like these figures. For a married man on average earnings, with no children, during Labour's five years of office, the percentage change in the real take-home pay went down by 0·9 per cent. What happened in the relevant past seven years? There was an increase of 17·7 per cent. What a contrast—between a person's take-home pay on average earnings going up in real terms by 17·7 per cent. and going down by 0·9 per cent.
What about a couple on twice average earnings? Their take-home pay went down during Labour's period of office by 2·4 per cent. against an increase of 19·7 per cent. during the Conservative period of office.
I have endeavoured to show how the Finance Bill takes account of people on average, below or above-average earnings and how Conservative taxation policies have benefited those in all categories.
I was asked by my right hon. Friends the Members for Guildford and for Worthing and by the right hon. Member for Ashton-under-Lyne for the Government's position on the exchange rate mechanism. I can reiterate the precise position. The time is not ripe and, as has been said many times from the Dispatch Box, the matter is being kept under constant review. We will not enter the exchange rate mechanism unless there is a clear balance of advantage in favour of us doing so. The Government's views were stated clearly by my hon. Friend the Economic Secretary during a debate on 29 January.
My hon. Friend the Member for Tatton made an important contribution. He asked us to consider what is happening in manufacturing. That was raised by three or four other hon. Members. I would remind the House that manufacturing profitability in 1984 was at 6·5 per cent., which was the best since 1973. Manufacturing exports went up by 6 per cent. in 1985 and are expected to rise by a further 6 per cent. in 1986. Manufacturing industry is expected to be a major beneficiary of the fall in oil prices. [Interruption.] Hon. Members ought to listen to the extent to which these are all positive aspects of Government policy on manufacturing enterprises.
In no other recent five-year period has manufacturing been so successful in holding its market share and keeping pace with world output. The Finance Bill offers for incentives a cut in the basic rate, which is of course the marginal rate for 95 per cent. of taxpayers. It offers for business and enterprise a package of measures, including an indefinite extension of the business expansion scheme in recognition of its great success, effective action to prevent family businesses from being broken up for tax reasons, a unique opportunity for individual share ownership through personal equity plans and widely welcomed new reliefs for charitable giving. All that is in the context of a sound economic strategy which has given us, in 1985, the third successive year of both steady growth and low inflation, and an outlook for 1986 which is the best for a generation.
I commend the Bill to the House.

10 pm

Mr. Stuart Bell: I listened with the utmost interest to the Financial Secretary's speech—[Interruption.]—but he did not address himself to several points that formed the basis of his own argument. The right hon. Gentleman referred to the very high—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman has the Floor.

Mr. Bell: The Minister referred to the point that people were better off taxation-wise in relation to earnings, but he did not relate that to the fact that earnings have increased over a period of time. [Interruption.] He did not refer to what those earnings were. It is a pity for the House that he did not do so.
The Minister also failed to meet the point that the Budget had been predicated on the price of oil being $15


a barrel, whereas it is now $12. Those are all important factors in relation to the Finance Bill—[Interruption.] The House is entitled to know what the Government think of those issues, which are very important for the economy. Indeed, the people of this country are entitled to know what the Treasury team's view is, but the Financial Secretary has not told us.
The Minister had half an hour in which to speak, and it is a pity that he did not spend that time on the issues relating to Government policy. Instead, he produced a series of spurious calculations that involved a sleight of hand to show what a Labour Government might do, some seven years after the Labour Government were last in office.
It is a pity that the Financial Secretary refused to spend any time saying what this Government would do, and instead concentrated on what the Labour party would do if it was in government—[Interruption.] From the country's point of view, it is a pity that those points were not clarified. How can the Government put forward a Budget that is based on oil costing $15 a barrel, when the price has fallen to $12? The Opposition want to know how the Chancellor can predicate his Budget on the price of oil when he has lost a further £3,000 million in Government revenue since the Budget statement—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman is absolutely in order to be speaking now, and he should be heard.

Mr. Bell: Having had the attention of the House for the past few minutes, I invite the Financial Secretary to respond to those points in the interests not only of the Opposition, but of the country as a whole.

Question put:—

The House divided: Ayes 264, Noes 190.

Division No. 161]
[10.03 pm


AYES


Aitken, Jonathan
Browne, John


Alexander, Richard
Bruinvels, Peter


Amess, David
Bryan, Sir Paul


Ancram, Michael
Buchanan-Smith, Rt Hon A.


Arnold, Tom
Buck, Sir Antony


Ashby, David
Budgen, Nick


Atkins, Robert (South Ribble)
Bulmer, Esmond


Atkinson, David (B'm'th E)
Burt, Alistair


Baker, Rt Hon K. (Mole Vall'y)
Butcher, John


Baker, Nicholas (Dorset N)
Butterfill, John


Baldry, Tony
Carlisle, John (Luton N)


Banks, Robert (Harrogate)
Carlisle, Rt Hon M. (W'ton S)


Batiste, Spencer
Carttiss, Michael


Bellingham, Henry
Cash, William


Bendall, Vivian
Chalker, Mrs Lynda


Best, Keith
Chapman, Sydney


Bevan, David Gilroy
Chope, Christopher


Biffen, Rt Hon John
Clark, Dr Michael (Rochford)


Biggs-Davison, Sir John
Clark, Sir W. (Croydon S)


Blaker, Rt Hon Sir Peter
Clegg, Sir Walter


Body, Sir Richard
Colvin, Michael


Bonsor, Sir Nicholas
Coombs, Simon


Boscawen, Hon Robert
Cope, John


Bottomley, Peter
Cormack, Patrick


Bowden, A. (Brighton K'to'n)
Couchman, James


Bowden, Gerald (Dulwich)
Cranborne, Viscount


Boyson, Dr Rhodes
Critchley, Julian


Braine, Rt Hon Sir Bernard
Crouch, David


Brandon-Bravo, Martin
Dickens, Geoffrey


Bright, Graham
Dorrell, Stephen


Brinton, Tim
Dover, Den


Brittan, Rt Hon Leon
du Cann, Rt Hon Sir Edward


Brooke, Hon Peter
Dunn, Robert


Brown, M. (Brigg &amp; Cl'thpes)
Durant, Tony





Eggar, Tim
Lennox-Boyd, Hon Mark


Emery, Sir Peter
Lester, Jim


Evennett, David
Lewis, Sir Kenneth (Stamf'd)


Eyre, Sir Reginald
Lightbown, David


Fairbairn, Nicholas
Lilley, Peter


Fallon, Michael
Lloyd, Ian (Havant)


Farr, Sir John
Lloyd, Peter (Fareham)


Fenner, Mrs Peggy
Luce, Rt Hon Richard


Finsberg, Sir Geoffrey
Lyell, Nicholas


Fletcher, Alexander
McCrindle, Robert


Fookes, Miss Janet
McCurley, Mrs Anna


Forman, Nigel
Macfarlane, Neil


Forsyth, Michael (Stirling)
MacGregor, Rt Hon John


Forth, Eric
MacKay, Andrew (Berkshire)


Franks, Cecil
MacKay, John (Argyll &amp; Bute)


Fraser, Peter (Angus East)
Maclean, David John


Freeman, Roger
McNair-Wilson, M. (N'bury)


Fry, Peter
McNair-Wilson, P. (New F'st)


Gardiner, George (Reigate)
Madel, David


Gardner, Sir Edward (Fylde)
Major, John


Garel-Jones, Tristan
Malins, Humfrey


Gilmour, Rt Hon Sir Ian
Maples, John


Glyn, Dr Alan
Marlow, Antony


Goodhart, Sir Philip
Marshall, Michael (Arundel)


Goodlad, Alastair
Mates, Michael


Gow, Ian
Mather, Carol


Gower, Sir Raymond
Maude, Hon Francis


Greenway, Harry
Mawhinney, Dr Brian


Gregory, Conal
Maxwell-Hyslop, Robin


Griffiths, Peter (Portsm'th N)
Mayhew, Sir Patrick


Grist, Ian
Mellor, David


Ground, Patrick
Merchant, Piers


Grylls, Michael
Meyer, Sir Anthony


Gummer, Rt Hon John S
Miller, Hal (B'grove)


Hamilton, Neil (Tatton)
Mills, Iain (Meriden)


Hanley, Jeremy
Miscampbell, Norman


Hannam, John
Mitchell, David (Hants NW)


Hargreaves, Kenneth
Moate, Roger


Harris, David
Monro, Sir Hector


Harvey, Robert
Montgomery, Sir Fergus


Haselhurst, Alan
Moore, Rt Hon John


Hawkins, C. (High Peak)
Morrison, Hon P. (Chester)


Hawksley, Warren
Moynihan, Hon C.


Hayhoe, Rt Hon Barney
Neale, Gerrard


Hayward, Robert
Nelson, Anthony


Henderson, Barry
Neubert, Michael


Heseltine, Rt Hon Michael
Newton, Tony


Hickmet, Richard
Nicholls, Patrick


Hicks, Robert
Norris, Steven


Higgins, Rt Hon Terence L.
Onslow, Cranley


Hind, Kenneth
Oppenheim, Phillip


Hirst, Michael
Oppenheim, Rt Hon Mrs S.


Hogg, Hon Douglas (Gr'th'm)
Osborn, Sir John


Holland, Sir Philip (Gedling)
Ottaway, Richard


Hordern, Sir Peter
Page, Richard (Herts SW)


Howard, Michael
Parkinson, Rt Hon Cecil


Howarth, Gerald (Cannock)
Patten, Christopher (Bath)


Howell, Rt Hon D. (G'ldford)
Patten, J. (Oxf W &amp; Abgdn)


Howell, Ralph (Norfolk, N)
Pattie, Geoffrey


Hubbard-Miles, Peter
Pawsey, James


Hunt, David (Wirral W)
Peacock, Mrs Elizabeth


Hunter, Andrew
Porter, Barry


Hurd, Rt Hon Douglas
Portillo, Michael


Irving, Charles
Powley, John


Jenkin, Rt Hon Patrick
Price, Sir David


Johnson Smith, Sir Geoffrey
Proctor, K. Harvey


Jones, Gwilym (Cardiff N)
Raffan, Keith


Jones, Robert (Herts W)
Rathbone, Tim


Kellett-Bowman, Mrs Elaine
Rees, Rt Hon Peter (Dover)


Kershaw, Sir Anthony
Rhys Williams, Sir Brandon


Key, Robert
Ridsdale, Sir Julian


King, Roger (B'ham N'field)
Rifkind, Rt Hon Malcolm


Knight, Greg (Derby N)
Roberts, Wyn (Conwy)


Knowles, Michael
Roe, Mrs Marion


Knox, David
Sainsbury, Hon Timothy


Lang, Ian
St. John-Stevas, Rt Hon N.


Latham, Michael
Shepherd, Colin (Hereford)


Lawler, Geoffrey
Shepherd, Richard (Aldridge)


Lawrence, Ivan
Shersby, Michael


Lawson, Rt Hon Nigel
Sims, Roger






Skeet, Sir Trevor
Waddington, David


Soames, Hon Nicholas
Wakeham, Rt Hon John


Spicer, Michael (S Worcs)
Waldegrave, Hon William


Stanbrook, Ivor
Walker, Bill (T'side N)


Stern, Michael
Waller, Gary


Stevens, Lewis (Nuneaton)
Ward, John


Stewart, Andrew (Sherwood)
Wardle, C. (Bexhill)


Stewart, Ian (Hertf'dshire N)
Watson, John


Taylor, John (Solihull)
Watts, John


Taylor, Teddy (S'end E)
Wells, Bowen (Hertford)


Tebbit, Rt Hon Norman
Wells, Sir John (Maidstone)


Thomas, Rt Hon Peter
Wheeler, John


Thompson, Donald (Calder V)
Wiggin, Jerry


Thompson, Patrick (N'ich N)
Winterton, Mrs Ann


Thurnham, Peter
Wood, Timothy


Townend, John (Bridlington)
Younger, Rt Hon George


Townsend, Cyril D. (B'heath)



Trippier, David
Tellers for the Ayes:


van Straubenzee, Sir W.
Mr.Archie Hamilton and


Viggers, Peter
Mr. Gerald Malone.


NOES


Abse, Leo
Cunliffe, Lawrence


Adams, Allen (Paisley N)
Cunningham, Dr John


Alton, David
Davies, Rt Hon Denzil (L'lli)


Anderson, Donald
Davies, Ronald (Caerphilly)


Archer, Rt Hon Peter
Davis, Terry (B'ham, H'ge H'l)


Ashley, Rt Hon Jack
Deakins, Eric


Atkinson, N. (Tottenham)
Dewar, Donald


Bagier, Gordon A. T.
Dixon, Donald


Barnett, Guy
Dormand, Jack


Barron, Kevin
Dubs, Alfred


Beckett, Mrs Margaret
Duffy, A. E. P.


Beith, A. J.
Eadie, Alex


Bell, Stuart
Evans, John (St. Helens N)


Benn, Rt Hon Tony
Ewing, Harry


Bennett, A. (Dent'n &amp; Red'sh)
Faulds, Andrew


Bermingham, Gerald
Field, Frank (Birkenhead)


Bidwell, Sydney
Fields, T. (L'pool Broad Gn)


Blair, Anthony
Fisher, Mark


Boothroyd, Miss Betty
Flannery, Martin


Boyes, Roland
Foot, Rt Hon Michael


Bray, Dr Jeremy
Forrester, John


Brown, Gordon (D'f'mline E)
Foster, Derek


Brown, N. (N'c'tle-u-Tyne E)
Foulkes, George


Brown, Ron (E'burgh, Leith)
Fraser, J. (Norwood)


Buchan, Norman
Freeson, Rt Hon Reginald


Caborn, Richard
Garrett, W. E.


Callaghan, Rt Hon J.
George, Bruce


Callaghan, Jim (Heyw'd &amp; M)
Gilbert, Rt Hon Dr John


Campbell, Ian
Godman, Dr Norman


Campbell-Savours, Dale
Golding, John


Canavan, Dennis
Gould, Bryan


Carter-Jones, Lewis
Gourlay, Harry


Cartwright, John
Hamilton, James (M'well N)


Clark, Dr David (S Shields)
Hamilton, W. W. (Fife Central)


Clarke, Thomas
Hancock, Michael


Clay, Robert
Harman, Ms Harriet


Clelland, David Gordon
Harrison, Rt Hon Walter


Clwyd, Mrs Ann
Hart, Rt Hon Dame Judith


Cocks, Rt Hon M. (Bristol S)
Hattersley, Rt Hon Roy


Coleman, Donald
Haynes, Frank


Conlan, Bernard
Heffer, Eric S.


Cook, Frank (Stockton North)
Hogg, N. (C'nauld &amp; Kilsyth)


Cook, Robin F. (Livingston)
Holland, Stuart (Vauxhall)


Corbett, Robin
Howell, Rt Hon D. (S'heath)


Corbyn, Jeremy
Hoyle, Douglas


Craigen, J. M.
Hughes, Dr Mark (Durham)


Crowther, Stan
Hughes, Robert (Aberdeen N)





Hughes, Roy (Newport East)
Randall, Stuart


Hughes, Sean (Knowsley S)
Raynsford, Nick


Janner, Hon Greville
Redmond, Martin


Jenkins, Rt Hon Roy (Hillh'd)
Rees, Rt Hon M. (Leeds S)


John, Brynmor
Richardson, Ms Jo


Jones, Barry (Alyn &amp; Deeside)
Roberts, Allan (Bootle)


Kennedy, Charles
Roberts, Ernest (Hackney N)


Kilroy-Silk, Robert
Robertson, George


Kirkwood, Archy
Robinson, G. (Coventry NW)


Lambie, David
Rogers, Allan


Lamond, James
Rooker, J. W.


Leighton, Ronald
Ross, Ernest (Dundee W)


Lewis, Terence (Worsley)
Ross, Stephen (Isle of Wight)


Litherland, Robert
Sedgemore, Brian


Livsey, Richard
Sheerman, Barry


Lloyd, Tony (Stretford)
Sheldon, Rt Hon R.


Lofthouse, Geoffrey
Shore, Rt Hon Peter


McCartney, Hugh
Short, Ms Clare (Ladywood)


McDonald, Dr Oonagh
Silkin, Rt Hon J.


McKelvey, William
Skinner, Dennis


MacKenzie, Rt Hon Gregor
Smith, C. (Isl'ton S &amp; F'bury)


Maclennan, Robert
Smith, Rt Hon J. (M'ds E)


McNamara, Kevin
Snape, Peter


McTaggart, Robert
Soley, Clive


Madden, Max
Spearing, Nigel


Marek, Dr John
Stewart, Rt Hon D. (W Isles)


Marshall, David (Shettleston)
Stott, Roger


Martin, Michael
Straw, Jack


Mason, Rt Hon Roy
Thomas, Dafydd (Merioneth)


Maxton, John
Thomas, Dr R. (Carmarthen)


Maynard, Miss Joan
Thompson, J. (Wansbeck)


Meacher, Michael
Thorne, Stan (Preston)


Michie, William
Tinn, James


Mikardo, Ian
Wainwright, R.


Millan, Rt Hon Bruce
Wallace, James


Mitchell, Austin (G't Grimsby)
Wardell, Gareth (Gower)


Morris, Rt Hon A. (W'shawe)
Wareing, Robert


Morris, Rt Hon J. (Aberavon)
Weetch, Ken


Nellist, David
White, James


Oakes, Rt Hon Gordon
Wigley, Dafydd


O'Neill, Martin
Williams, Rt Hon A.


Park, George
Wilson, Gordon


Parry, Robert
Winnick, David


Pavitt, Laurie
Woodall, Alec


Pendry, Tom
Wrigglesworth, Ian


Penhaligon, David
Young, David (Bolton SE)


Pike, Peter



Powell, Raymond (Ogmore)
Tellers for the Noes:


Prescott, John
Mr. John McWilliam and


Radice, Giles
Mr. Allen McKay.

Question accordingly agreed to.

Bill read a Second time.

FINANCE BILL (COMMITTAL)

Ordered,
That Clauses Nos. 2, 15, 26 and 80 be committed to a Committee of the whole House;
That the remainder of the Bill be committed to a Standing Committee;
That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Moore.]

Committee tomorrow.

Employment Subsidies

The Parliamentary Under-Secretary of State for Employment (Mr. Ian Lang): I beg to move,
That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme, the cost of which is expected to exceed £10 million for the year ending 31st March 1987, for making payments to employers to enable them to take on as new employees young people with earnings below the limits specified in the statement laid before the House on 22nd April 1986.
The motion authorises the Secretary of State to set up the new workers scheme, announced by my right hon. Friend the Chancellor in his Budget statement on 18 March. The Employment Subsidies Act 1978, to which it refers, as renewed by order in 1985, empowers the Secretary of State to set up schemes to give financial assistance to employers, to enable them to take on new employees and to maintain or enlarge their labour force. This is the aim of the new workers scheme.
The Act states that a resolution of the House is necessary if the scheme is expected to cost more than £10 million. The Chancellor announced that this scheme is expected to cost about £26 million between 1 April 1986 and 31 March 1987, and it is, therefore, necessary to pass the motion that we are debating. A similar scheme will be run in Northern Ireland.
The other requirements of the Act—that the Secretary of State should consult such organisations as are considered appropriate, which in this case have included the TUC and CBI, and lay a statement before the House explaining the proposals—have been fulfilled.
Tonight's debate is about jobs for young people. That is our goal in proposing the new workers scheme. It will be an important strand in the comprehensive package of measures that we have developed to support enterprise and employment. The scheme will encourage employers to provide more job opportunities for young people—primarily those who have completed training on the youth training scheme—at realistic wages which sensibly reflect their age and their inexperience of the world of work. It thus delivers help where it is needed and where it can work. It forms part of the most imaginative and comprehensive approach ever devised to give young people a proper preparation for work and a start in a job.
Sixteen-year-old school leavers will now be able to receive two years' training and 17-year-old leavers one year under YTS, leading to a recognised qualification. Already about 60 per cent. of YTS leavers go into a job afterwards and more into further training. The new workers scheme will help to maintain or even raise that proportion by giving employers an extra incentive to take them on. It will contribute to the increasing awareness of economic reality—that wages which are too high and do not bear a close enough relationship to the contribution people are able to make to a business—lead only to fewer job opportunities. Young people do not naturally expect to earn a high proportion of their parents' salary as soon as they start work. That leaves them nothing to aim for and work towards. In the early 1970s, their expectations about wages were inflated and then dashed because young people had been priced out of jobs.
We have made a lot of progress since then. We have introduced YTS, to give young people proper training; we

have successfully run the young workers scheme; we have reduced the national insurance costs of employing someone; we have introduced proposals about wages councils and young people and our enterprise, training and employment policies have borne fruit. There have been around a million extra jobs in the past three years. Now we have two year YTS, and to complement it, the new workers scheme.

Mr. Dave Nellist: In listing those measures of which the Government are unjustly proud, is the Minister aware of two facts? First, school leavers' wages, relative to adults' wages, have dropped over the past six years by 12 per cent. for boys and 13 per cent. for girls at a time when youth unemployment has trebled? There is no relationship between cutting youth wages and increasing youth jobs, except more poorly paid youth.
Secondly, the young workers scheme, which the Minister has just appraised, was analysed in research paper No. 42 by Mr. W. Wells of the Department of Employment, which showed that eight out of 10 jobs created by the young workers scheme were at the expense of adult workers. It may well create a few jobs for young workers but that is at the expense of putting workers in their 40s and 50s on the dole queue.

Mr. Lang: The hon. Gentleman is wrong. The figure was not eight out of 10 but eight out of 100–8 per cent. of adult substitution—a much lower figure As for the trend of youth wages in relation to employment, most of the fall in youth wages has taken place in the past three years, and that is at a time when youth unemployment has been falling, as I shall illustrate shortly.
I should like to describe briefly the way in which the scheme will work. Its aim is to encourage employers to take on more young people into full-time, permanent jobs, at rates of pay which realistically reflect their age and relative inexperience. To achieve that, a payment of £15 a week will be made to the employer, for up to 52 weeks, in respect of each young person involved. The scheme will be open to all employers except those in the public services or private households. Young people must be paid £55, or less for employees aged 19 or younger on the date they start in the job, or £65, or less for those aged 20 on the day they start in the job. As for the young people themselves, they must be under 21, in their first year of employment, no longer eligible for YTS or unable to find a YTS continuation place.
The resolution seeks the approval of the House for making payments to employers on that basis. Clearly we cannot be precise about the number of applications employers will make under the new workers scheme in the coming year, but our estimate is that some 100,000 successful applications will be made before 31 March next year, on which date there should be, perhaps, 63,000 young people in jobs supported by the scheme. In that case, the estimated expenditure would, as I have said, be some £26 million.
The scheme will be administered by Department of Employment staff in our employment measures office in six regional centres. Staff in jobcentres and careers offices will of course give every assistance to employers who wish to take advantage of the scheme.
We are determined to make the procedures as unbureacratic and straightforward as possible, as it is


employers, many no doubt in small businesses, whom we shall be encouraging to offer extra opportunities to young people and who need to feel confident that they will not be caught up in delays and red tape.
We shall be taking steps to make sure that information about the scheme is made available to employers and businesses and we have already included an outline of the new scheme—making clear that it remains subject to the approval of the House—in our new "Action for Jobs" booklet. The new workers scheme is a significant part of our policy for providing the opportunities—or, rather the means for others to provide the opportunities—for employment.
That, then, is an outline of the proposed scheme and I should like to go on to describe the context in which it is set and the way in which it fits into our policies. The House will recognise that the new workers scheme is not dissimilar to the young workers scheme, which as my right hon. Friend the Chancellor announced in his budget a year ago, closed on 31 March this year. By that time, 435,000 applications will have been approved under the young workers scheme and, in view of some of the points made in this House when we sought authority for that scheme, and its similarity to the new workers scheme, I think it is worthwhile reminding the House about its success. I am glad to say a full evaluation of the young workers scheme will be published in an article in next month's Employment Gazette. I commend this to the hon. Member for Kingston upon Hull, East (Mr. Prescott).
The evaluation over the four years of YWS suggests that the scheme has been creating more and more jobs per unit of expenditure over time. We think that this has been due both to more employers, and particularly smaller employers, learning about the scheme and creating new jobs for young people under it, and to the fact that more, better trained young people have been available as they left the old youth opportunities programme and, now, YTS. In fact, about two thirds of young people in jobs supported by YWS have previously been on YTS, and the proportion of jobs supported which were created directly as a result of the young workers scheme has risen to its current level of some 27 per cent.
As the percentage has steadily increased since the scheme began, we now estimate that some 90,000 jobs for young people have been created directly by the scheme. These were not jobs that would have existed anyway, not jobs in which young workers on YWS are substituted for other workers at the same firm, not jobs which perhaps displace workers in other businesses, but new, additional jobs.
There are always difficulties with any sort of scheme involving payments to employers for employees they might have recruited anyway. We believe that the careful design and administration of YWS and its direct link to YTS meant that is provided valuable, cost-effective help. It is exactly what we are aiming to achieve for a slightly older, more mature age group with the new workers scheme, which should build on our experience and that of employers in using the scheme, and which will, in its turn, complement the new, developed YTS.
Another important aim of the young workers scheme was to affect the rates of pay of young people so as to achieve a more realistic relativity with adult wages. There is a large and growing consensus of academic studies

which shows that the high cost of youth labour relative to adults has adversely affected the job opportunities of young people. In other words, as one would expect, in a labour market in which the demand for young labour had fallen from previously high levels, young people's relatively high wages were increasingly handicapping their search for work. Some success seems to have been gained in this area. Since 1982, when YWS was introduced, relative earnings of under-18s have fallen and so has unemployment. Of course, several factors will have influenced both youth earnings and unemployment, including the introduction of YTS and demographic movements. But no doubt the young workers scheme will also have been influential, as we expect the new workers scheme to be.
YWS was successful because, in the vast majority of cases, young workers supported by the scheme continued in the same post or with the same employer at the end of the period of support—a survey of employers told us that this was their intention in 90 per cent. of cases. That is an impressive result, I think the House will agree.

Mr. John Prescott: Did they do that?

Mr. Lang: The vast majority, as far as we are aware, did just that.
Some hon. Members expressed concern that training would not be given under YWS. Again, there is evidence from surveys that employers have provided a significant amount of training for those young workers for whom they were claiming support.
Now the new two-year youth training scheme is with us, it offers two years' training for 16-year-old school leavers and one year for 17-year-old leavers—training in greater depth and in the occupational skills which industry and business need. There are around 360,000 entrants each year and up to 500,000 in training at any one time. The new workers scheme will boost the employment prospects of those leaving YTS or who are too old for it by giving employers a positive incentive to recruit them.
The age group we are catering for with the new scheme is thus the 18 to 20-year-olds. They, the post-YTS age group, will have prepared for the world of work, acquired a recognised qualification and now need the opportunity to prove their worth to an employer. For them, NWS will thus be, as I have said, part of a highly imaginative and comprehensive package of measures towards a start in work with the prospect of two years of high quality training followed by a year's supported employment at sensible wages.
Young people need a sensible start in which they can find their feet, learn skills, prove their value to themselves, their workmates and their employer. What they do not need are expectations of being able to leave school without a skill or the qualities employers are looking for and being able to walk into a job earning the same as an experienced adult. Those expectations are false and too often frustrated.
YTS and the new workers scheme together offer a sensible progression in earnings from the first year's YTS allowance of £27·30, the second year's allowance of £35, and then a wage of up to £55 in a new workers scheme job for an 18-or 19-year-old recruit, or up to £65 for a 20-year-old new worker. That is a sensible progression, in reasonable stages. Crucially, NWS gives a young person


the opportunity to earn more, as their contribution to an enterprise increases and their skills and experience develop.
Just as the new workers scheme complements YTS, so too it fits directly into our wider policies to support employment and enterprise opportunities. We have introduced to the House our proposals for removing from the scope of wages councils young people below the age of 21, so as to increase their employment prospects. If those proposals receive the approval of the House, as I am confident that they will, there will be all the more opportunity for employers to create more vacancies for young people new on to the labour market without the concern that they would have little chance of contributing as much to the enterprise as they are required to be paid.
Moreover, it is precisely at levels of earnings similar to those which will apply under the new workers scheme that the positive effects of my right hon. Friend the Chancellor's changes to the rates of national insurance contributions will work most effectively, increasing the attractiveness of young people to employers.
Taken together with the effects of our other policies for employment and enterprise, the new workers scheme will provide a significant extra boost to the prospects of young people entering work. It follows on from a successful and proven scheme, the young workers scheme, which complemented YTS and provided job opportunities for 435,000 16 and 17-year-olds.
Now we have gone on to develop and introduce an even more effective and relevant preparation and training provision in the two-year YTS, which the new workers scheme will tie into exactly, by encouraging employers to take on young people leaving YTS or no longer eligible for it. It is right in line with the changes that we are proposing for wages councils and young people. It is supported by changes in national insurance rates.

Mr. John Evans (St. Helens, North): The Minister has been extolling the virtues of the scheme at some length. He will recall that at the outset of his remarks he said that he was called upon to consult both the employers' organisations and the TUC. He has spoken at length about the attitude of the employers. Will he explain that the TUC, the body responsible for organising over 11 million workers, completely rejects the scheme?

Mr. Lang: I am sure that the hon. Gentleman will have an opportunity to do that soon. We consulted both the CBI and the TUC. The CBI supported the scheme, and the TUC opposed it. He will be able to enlarge on the reasons that the TUC gave, and I shall be happy to reply to them.

Mr. Geoff Lawler: In one draft of the statement that I have seen, it says that applicants should normally have exhausted eligibility for YTS. Will my hon. Friend confirm that they must have done so, to prevent employers poaching people half way through the YTS, much to the detriment of the skill training?

Mr. Lang: The object is that a YTS leaver should go into a new workers scheme. In the first year of that scheme, there will be those leaving the one-year YTS who are unable to get continuation places on the YTS, and will want to move to the new workers scheme, which will make specific provisions for that. The object of the exercise is that the one scheme will lead on to the other, thus helping young people to a graduated progression into employment.

It will be cost-effective and carefully administered, so as to deliver positive financial encouragement where it can do most good, with the minimum of fuss.
I believe that the new workers scheme to be a sound and useful addition to the Government's comprehensive series of measures in the interests of jobs for young people, and I commend the motion to the House.

Mr. John Evans (St. Helens, North): In any debate about employment or employment creation schemes, which we are discussing tonight, it is important for the participants to keep three sets of figures very much in mind.
The first figure to keep at the forefront of our minds is the 3,323,776 registered claimants receiving benefits in the United Kingdom now. Of course, "registered claimants" is the Government's definition of the unemployed. The second figure or set of statistics to keep at the forefront of our minds is of about 200,000 men and women currently employed on the Government's community programme. It is one of the Government's major job creation schemes. An important fact to bear in mind is that no fewer than 1,500,000 unemployed people are eligible for a place on that programme.
The third figure is probably the most important in the context of the debate. It relates to the level of unemployment amongst the under-25s. It is obviously germane to the introduction of a scheme that affects young workers. Unfortunately, there are not any unemployment figures for the under-21s, so I must make do with unemployment statistics for the under-25s. There are no fewer than 1,246,892 of them: that is, 36·6 per cent. of the total unemployed people are under 25 years of age. By any standard that can be described only as a crisis. It is even more of a crisis when we appreciate that hundreds of thousands of those youngsters have never had a job since they left school.
All of the figures that I have given were used by the Minister on Tuesday 22 April during employment Question Time. His answers can be found at columns 99, 100 and 104 of the Official Report for 22 April.
The other figure that we must think about is the missing figure, that is, the difference between registered claimants the Government's favoured definition and all those who are unemployed, who would gladly accept work if there was any available for them. This is a grey area. The Government have consistently fiddled the unemployment figures for the past six years.
My estimate—of course, anyone can join in this game—is that more than 1 million unemployed are not being measured by the statistics. They would accept employment if it was available to them.
We must bear in mind that each of those figures represents a human being. Many of them are young people. Their efforts and abilities are being wasted. They are probably the greatest wasted resource in our country today.
A further factor to bear in mind in our debates about employment and job creation schemes is the curious contradiction of the Prime Minister and other Ministers that is evident whenever the Tory party gets round to discussing one of the schemes. They claim that the Government cannot create jobs. Yet here are tonight discussing a scheme that the Government tell us is a job creation scheme. I believe that the Prime Minister is


cynical about all these schemes. That contradiction is the reason that the Government's job creation schemes are in a mess. They are cosmetic exercises. Often they are designed more to depress wages than for any other reason. That is certainly true of the young workers scheme and the scheme we are discussing tonight.
A consistent feature about the schemes is a desire to do something—anything—about the unemployment statistics rather than tackle the real causes of unemployment. I am sure that the House would appreciate the comments that were made last week during employment Question Time when Tory Back Bencher after Tory Back Bencher suggested to the Minister various methods and means of having another fiddle of the unemployment figures.

Mr. Robert Atkins: Fiddle?

Mr. Evans: Yes, another fiddle of the unemployment figures. They suggested ways to reduce the total of unemployed claimants. This new wheeze—the new workers scheme—reflects that philosophy perfectly, because all the evidence of the past few years shows that it will not increase employment and will do nothing to benefit young workers. I put it on the record immediately that the next Labour Government will scrap this scheme, just as we would have scrapped the young workers scheme which it replaces.
The Employment Subsidies Act 1978, under which the Government must come to the House for approval for the new measure, provides explicitly in section 1(1):
The Secretary of State may … set up schemes for making payments to employers which will enable them to retain persons in employment who would or might otherwise become unemployed, to take on new employees, and generally to maintain or enlarge their labour force.
The new scheme, as with its predecessor, will not maintain and will certainly not enlarge the labour force.
Many trade unions will provide proof that, in many cases, youngsters employed under the YWS merely replaced older employees on higher wages. The incentive to do that is great. By replacing an 18-year-old on the average wage with a subsidised YWS employee, the employer stood to save more than 40 per cent. on labour costs. Even when creating a new job through the scheme, such an employer stood to save more than 25 per cent. Under the new scheme, with the protection of the wages councils removed from under 21-year-olds—as the Government plan to do—an employer taking on an NWS candidate will benefit from a saving of about 60 per cent. on labour costs if he sacks someone else, and of about 25 per cent. if he creates a completely new job.

Mr. George Park: Is my hon. Friend aware that, in Coventry, 24 young people are chasing every job vacancy? The only way in which new jobs can be provided is for employers to sack other workers and take on what amounts to cheap labour.

Mr. Evans: I am grateful to my hon. Friend for making that important point. I am sure that almost all of my hon. Friends from all parts of the United Kingdom could make similar points about their constituencies.
The argument that the scheme will benefit the economy simply does not hold water. There is no evidence that

merely by depressing wages we can reduce unemployment. The net effect on job creation—supposedly the rationale for the scheme—will be almost nil. In 1984, a study conducted by Sussex university estimated that the young workers scheme subsidised jobs that would have existed in 94 per cent. of cases anyway. Even the Government—in a Department of Employment commentary for the Select Committee on Employment entitled "Young Workers Scheme: Survey 1985"—estimated the figure to be 73 per cent. That estimate was taken from a tiny sample of 960 workers interviewed, of whom only 754 were young people.
I recall reading an article in the Financial Times in 1982, when the YWS was at its peak, stating that the scheme created only one job in 10 of those that it subsidised. I remember the article vividly because of its punch line. It arrived at the conclusion that the YWS would make our young people the most expensive shelf stackers in the history of British business. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) and I have often been attacked by Right-wing commentators for making similar points, but we believe that the new scheme will make matters even worse.
For the youngsters who are taken on by employers under the new workers scheme, there is no guarantee of a full-time job and no guarantee of training. The youngster who, through no fault of his own, cannot find a job—the simple fact is that in many areas no jobs are available—will be rewarded for his willingness to be employed on the scheme at less than standard wages with a job that offers no training, no prospects for the future and only the scrap heap once again when his year is finished. I have a son who spent one year on YTS and a considerable time on the young workers scheme. I can therefore speak with some family knowledge of the position of the young people concerned.
The scheme is an open invitation for employers to practise job substitution. I fear that the scheme will become an adult workers substitution scheme, especially among adult female workers who earn between £70 and £100 a week. None of those female workers is likely to be on the employment register or able to claim benefit and they will often be substituted by a young female who will be on the register earning about £55 a week. The employer will therefore save money by employing the younger woman and, as far as the Government are concerned, the employment statistics will decline.
I should like to ask the Minister a question about the earnings ceiling which, according to paragraph 3 of the glossy document, is determined by the age at entry. As I read the document, young workers who are aged 19 years and 11 months will qualify for a wage of £55 a week or less. As I understand the scheme, they will not be entitled to a rise on their 20th birthday. The Minister nods in agreement, showing that my understanding of the position is correct. Therefore, the obvious time to recruit a young worker would be just prior to his 20th birthday. That means that for 11 months on the scheme, they will be earning £10 less than even the miserable maximum that the Government prescribed of £65. That is grossly unfair.
I reiterate that the scheme will not create new jobs, at least not enough to warrant the substantial expenditure that the Government are committing to it. The real intention of the scheme, which the Government have not even bothered to hide, is to depress wages in the hope that that will allow employers to afford to take on more employees.


That fantasy—I hesitate to credit the Government with a legitimate policy—is as discredited as the economic guru, Mr. Alan Walters, who dreamt up the original YWS. The fact that the Government have spent more than £190 million over the past four years simply to allow unscrupulous employers to force down the wages of young people is, I suggest, an obscene waste of taxpayers' money.
The entire concept of high wages creating high unemployment is defunct. Among young people, wages have fallen by 11 per cent. relative to adult wages over the past six years. In the meantime, youth unemployment has increased much faster than the rise experienced among other age groups. While 18 to 20-year-olds in employment earn on average two thirds of the equivalent adult wage or less, they experience unemployment rates of more than 24 per cent. It is noticeable that the NWS will not apply to the public sector and is targeted at the low paid, unorganised sector of the economy. It will have no effect on the organised highly skilled sector of the work force where youth wages have risen in line with adult wages. The Government's plans under this scheme will lead to the creation—if it does not already exist—of an institutionalised low pay sector, resistant to wage increases and to changes in wages structures.
That raises another question relating to paragraphs 20 and 25 of the glossy booklet about the way in which gross weekly earnings are calculated. The heading in the booklet is "How are earnings calculated?" According to my understanding of those paragraphs, if any young worker employed under the scheme receives overtime, shift payments, commission, bonuses, productivity payments, paid travel time or London or large town allowances, merit or skill payments, and these additional payments take the young worker's earnings over the maximum amount prescribed, no payment will be made to the employer. The Minister nods, so I presume that again I am correct. The young employee will not be permitted to refuse to work overtime or to demand night shift payment, piece work or any of the other matters that I have outlined, because there will be plenty more employees where they came from if the employer chooses to sack them because they refuse his request. They will have to do the work and they will not be paid for it.
When the coverage of the young workers scheme fell from its peak of 137,000 in 1982 to its present level of 55,000, the Government decided to merge the scheme with the youth training scheme in a two-year programme. I thought that the Government had learnt their lesson. However, with the introduction of this scheme—similar but, in my view, more damaging and less effective—I wonder how long it will be before the Government learn the biggest lesson of all: that real jobs will be created only if the Government invest in industry and expand the economy. The charity Youth Aid, commenting on the new workers scheme, said:
The Government is not offering a solution for the young, but a further incentive to unscrupulous adults to exploit and cheat them.
That is a bitter comment, but in my view it is a fully justified complaint.
In conjunction with the plan to revitalise the economy and to invest in the infrastructure, such a scheme would be more acceptable if it were open to unemployed workers of all ages and if it were not pegged to a specific maximum earnings level. That would be genuine job creation.
There should also be a condition, which there is not in this scheme, that an additional job will be created each time an employee is taken on and that employees will be guaranteed at least a year's employment, with an element of training to be incorporated in the job. If the criterion of an additional job were met, it would kill the scandal of adult substitution which is far, far higher than the figure given by the Minister. If training were incorporated as a condition to be imposed upon employers, it could lead to what my right hon. and hon. Friends and I would support—a Government-sponsored and financed three-year apprenticeship based upon acquired standards: two years of YTS and one year of training and work.
Most craft unions are increasingly prepared to accept apprenticeships that are based upon training to standards rather than upon a time-based apprenticeship. One of the leaders of my trade union, the Amalgamated Union of Engineering Workers, Gerry Russell, was reported in the Financial Times of 22 April 1986 as having said:
Leaders of the Amalgamated Union of Engineering Workers, Britain's largest craft union, believe that its policy of including a time-based element in apprentice training should be abandoned. Mr. Gerry Russell made this clear in his chairman's address to the AUEW's policy-making national committee, which opened in Eastbourne yesterday.
I stress that that will not happen under the proposed new workers scheme. No training conditions are laid down in the scheme.
There is the additional difficulty of this anti-trade union Government being unable to obtain any co-operation from the British trade union movement, particularly since it has made it clear that it will reject root and branch the scheme that has been put before the House by the Minister.
The scheme, as it will operate if the Government have their way, does not have the backing either of the trade union movement as a whole or of the trade unions that are involved in the industries that are concerned with the scheme. As I have already said, it is targeted at those areas of the economy where union representation is minimal. It should be an additional condition of the scheme that applications will be accepted only where rates of pay, standards of safety and employee protection are high enough to be acceptable to the recognised and appropriate union and where its acceptance is given. However, as there is very little union participation, one has to ask, in view of the abolition of wages council protection for those tinder 21 years of age, why paragraph 10 of the explanatory booklet was printed. What does paragraph 10 mean when it says:
It is the employer's responsibility to ensure that these obligations are met and approval of an application or payment of a claim does not imply acceptance by the Department that they are being met.
Surely it is the Department's duty to ensure that any employer who is receiving a subsidy from the taxpayer is meeting any legal requirements that the Department has laid down.
There is one further vital question that the Under-Secretary of State must answer. On Friday 24 April, the Minister for Social Security, slipped out a written answer, the effect of which was to increase disqualification from six to 13 weeks for anyone who
voluntarily leaves employment without just cause; refuses or fails, without good cause, to apply for a suitable job".—[Official Report, 25 April 1986; Vol. 96, c. 241.]
Does that apply to the new workers scheme? If so, the scheme will rapidly become known as the forced labour scheme, especially if young workers are directed to


employment outside their own area—for instance, from impoverished areas in the north, where it is doubtful that there are enough employers to take on unemployed people, to the more prosperous south. Young workers will be denied the right to leave low-paid employment which is either mind-bendingly boring and repetitive—for example, shelf-stacking—or injurious to health. I am sure that the Minister will appreciate that many Labour Members could give him plenty of examples of jobs which are injurious to health.
Surely even this tyrannical Government will not deprive our young people of every liberty. Surely our young people will not have to be subject to 13 weeks' loss of benefit if they refuse low-paid employment, or if they find that they cannot live with certain conditions. I hope that the Minister will clarify that point.
That is the Tory part of the story. The good news for young people is that a Labour Government would scrap the scheme as it presently stands and incorporate it into a strategy for the general reflation of demand and output in the economy. Employment and training measures will back up this growth in a co-ordinated way, to create jobs where they are most needed, and make up the present deficiency in skills. A package of job creation measures under a Labour Government would ensure proper training for the future, adequate conditions of employment and wages which do not exploit the work force, in a realistic bid to benefit those who require jobs and the country as a whole.
Plainly, the scheme as presently constituted does not meet any of those criteria. It is a mean and contemptible scheme. It is damaging to Britain's young work force. I urge the House to reject it.

Mr. Geoff Lawler: Any scheme that increases opportunities for young people must be welcomed. I believe that the new workers scheme will be welcomed. It is not short term but seeks to alter long-term entrenched attitudes which have depressed employment opportunities for youth in the past few decades. During the 1970s, the level of youth employment fell. Over the past 30 years or so, youth wages have risen consistently. It is no surprise that, in 1972 under 18-year-olds received an average wage which was 32 per cent. of an adult's wage. In 1979, they received 40 per cent. of the adult rate. That illustrates the problem for young people.
Since 1981, relative youth wages have been static. Again, it is no surprise that, in the under 20 age group, unemployment has declined in the past two years. In January 1984, the proportion of those unemployed in the 18 to 19-year-old age group was 27·4 per cent. In January this year, the figure was 25 per cent. The level of youth unemployment is going down. The figures are more dramatic for those under 18. The link is clear. It is common sense to anyone involved in industry that, if young people demand high wages, employers cannot afford to take them on. They must be paid a realistic wage.
Youth unemployment is not totally related to wage levels. Other factors govern why youth unemployment increases proportionately more than adult employment. The first thing an employer does when he enters a recession is stop recruitment. The second thing he does is

lay off the people recruited most recently. For those reasons, youth tends to suffer disproportionately during a recession.
It is tragic that 153,948 people under 19 have not had a job since leaving school. Of course, there is scope for further initiatives. The immediate scope can be seen in current average earnings. An 18-year-old man commands a wage of £89·50 a week on average. That cannot reflect the true value of youth labour, given their inexperience and lack of skills and given that people are receiving training and investment. The wage rate is totally unrealistic in general for a large number of young people.
The problem is not so much the attitudes of young people. I sincerely believe that they are prepared to accept their true worth to society. Anyone who doubts that need only look at the success of YTS. About 84 per cent. of those on the scheme have said that they are happy with it. The problem lies with the unions and employers, who too readily agreed high wage levels for young people and cobbled together agreements which, over the years, excluded increasing numbers of young people from the opportunity of employment.
The problem lies also with parents. They, perhaps more often than not, influence their children and instil unrealistically high expectations. Over the past 30 years, those parents have consistently bid up the price of labour. They have placed us in our present position where youth labour in many industries is priced unrealistically high. It is priced far higher in Britain than in many of our competitor countries which have much lower youth unemployment rates.
The scheme will be of maximum benefit in three respects. First, it will be of benefit in those industries where unrealistically high wages still predominate. They are generally the most heavily unionised and have come to terms with employers and fixed high youth wages relative to adult wages. If the scheme is adopted in those industries, I hope that there will be a change of attitude and that the unions and employers will get together and use the scheme positively and constructively.
Secondly, the scheme will help those people leaving YTS with a qualification that is not particularly good. They will be at the end of the queue. The scheme will be especially helpful in encouraging those who are least well qualified to get work after YTS. It will ensure that a far higher proportion of YTS leavers find employment. It is not a coincidence that nearly half those people who have not obtained a job since leaving school have no qualifications.
Thirdly, the scheme will encourage more trade associations, employer associations and individual industries to put together three-year training schemes. The first two years will comprise YTS and the third will be the continuation year leading to apprenticeships and skill qualification. That has already happened with great success with the electrical contractors. They have increased threefold the number of young people taken into their industry—a real measure of the extent to which restructuring wage rates to more sensible levels can be of great assistance and create jobs. The construction industry is now doing the same thing. I hope that the scheme will be widely adopted by more employer groups and industries.
Of course it is of concern if any wage subsidy scheme produces an element of substitution, a certain part of which is bound to be unnecessary payment. The


Government must monitor this scheme to ensure that the money goes where it is most needed. If necessary, the Government should introduce extra conditions and make the scheme more selective. That would ensure that the scheme achieves its objects and that the money is well spent.
This scheme offers many young people the first step on the employment ladder. If young people remain unemployed they have no chance. When young people get the first step on the employment ladder it does not matter what their wage is. The important thing is that they have a job and a chance to prove themselves. They can work up the ladder and achieve good wages.

Mr. Michael Hancock: On 23 April this year the Paymaster General answered a question concerning the net possible gain in jobs from this scheme. He said that there would be a gain of about 27 per cent. That begs the question of what happened to the other 73 per cent. The answer is that the Government were massaging the employment figures.
The Comptroller and Auditor General carried out a survey on the special employment measures which were administered by the Department of Employment which helps to answer the question I have posed. The report stated:
Thus, the pay of young people is insignificant in terms of the economy as a whole. The DE suggested that whilst wider differentials must in theory help to transfer some jobs from older to younger workers, there was a risk that this might be at the expense of other vulnerable groups such as ethnic minorities, women and disabled workers. If borne out in practice, this could have significant consequences for the cost of Young Workers' Scheme: substitution of older workers by under-18s would be likely to mean increased benefit payments since older workers can be expected to have on average a higher level of benefit entitlement.
The Comptroller and Auditor General recognised that these schemes do nothing more than massage the situation and that the net gain is extremely small.
Earlier in the debate we heard of the horrific figure of 1·25 million people under 25 who are out of work and we must all be conscious that anything that looks like an opportunity for young people to have a chance of a job should be considered carefully. Experience has taught most people that these schemes hold little hope for the ambitions which, I hope, all young people have when they embark on a career.
The hon. Member for Coventry, South-East (Mr. Nellist), who intervened in the Minister's speech, spoke of the ratio of 25:1 of young people who are out of work in Coventry. In Portsmouth, that ratio is 20:1, and in the travel-to-work area it is 15:1. In an area on the south coast, a place which does not spring to mind when people discuss unemployment black spots, there are legions of young people lining up to fill any vacancy. The problem is repeated time after time throughout the country.
This proposed scheme will not hold any hope or salvation for those who so desperately look to the Government and the House to offer them the chance to fulfil their ambitions harboured over the years. A scheme such as this can have three effects on youth unemployment. The subsidy may be claimed simply because it is there and not specifically for the purpose of creating additional jobs. Some employers will look to recoup what they can in the form of the subsidy.
There can also be a displacement effect which was made clear by the hon. Member for St. Helens, North (Mr. Evans). The Minister has admitted that the displacement effect has an overwhelming effect on people in work. People are pushed out by the schemes.

Mr. Evans: Is the hon. Gentleman aware that the likely displacement effect of the new scheme will be far worse than under the young workers scheme? It related only to 17-year-olds, but this one includes youngsters of 19 and 20 right up to their 21st birthday.

Mr. Hancock: The hon. Gentleman is right to be so pessimistic about the future. Experience must lead all hon. Members who have followed the matter carefully to see that the higher the age, the greater the effect of displacement on those in work. All hon. Members must accept the displacement argument.
My third point relates to job creation and the ability of the schemes to provide training. This measure will not expand the job market, create jobs or give people an incentive. I have read and reread the statement in the hope that I would find something that would lead me to believe that the Government were committed to investing in training. Surely, if we are ever to get to grips with the problem of 1·5 million under 25, hundreds of thousands of whom have never had a job to call their own, we must get to the nub of the problem.
I am sick to death of hearing chambers of commerce say that they do not get the right sort of people coming for jobs, that school leavers are semi-literate, and that people leave technical colleges with no skills. That is the problem. It is no use trying to bribe employers to keep down unemployment figures. The problem is that we are not providing people with the skills and ability to make them a worthwhile prospect for employment. The answer is not to bribe employers to take people off the dole queue. That will only add to and deepen the despair of many youngsters.
We shall not get out of the trough through solutions such as the one before us tonight. It is too deep for that. Until the Government recognise that significant point, unfortunately, night after night and day after day, our young people will feel frustrated, our streets will overflow with resentment and the Government will suffer from a backlash from our youth for the way in which they have been sold short. The Government can expect nothing else from people whom they have betrayed.
The hon. Member for Bradford, North (Mr. Lawler) spoke of ambitions being raised by the parents of these youngsters. Does he suggest that it is wrong to want to better oneself, to gain more for one's sweated labour and endeavours, or to try to get a bigger slice of the cake? During the 1960s and 1970s, when I was working as an engineer, my employer did not say to me, "We shall take a smaller cut in profit so that our product will be more competitive". That did not happen. But as a trade unionist, fighting for better conditions in factories, I was repeatedly told by the men, "If management can make more, surely we are entitled to a bit ourselves." Unfortunately, the hon. Gentleman is living in that rarefied atmosphere that Ministers must occupy because he seems to miss the point completely.
Is it not right for people to grow up with the ambition to have a job, and to earn a wage which will allow them


at 18 to support a family and a home? Many of my constituents now aged 20 have never had a job but are still married and having children.

Mr. Lawler: My point was that many parents say to their children, "Don't take a job unless you are paid £80 or £90 a week for it." That means that one is not destroying ambition; one is destroying opportunity, because many of them will not get jobs if they expect to get £80 or £90 a week at the age of 17 or 18.

Mr. Hancock: That sounds even more absurd the second time. The hon. Member has not just missed the point; he was never in a position to grasp it if he genuinely believes that to be the case.
The debate is about the failure of the Government to create a more prosperous economy. Instead of throwing more money into a scheme that only temporarily postpones unemployment, we should surely seek to train our young people for the future. We would do far better by investing the £26 million in training that would give people the skills that employers will want to use.
The Minister spoke about his concern for the unemployed. Perhaps at the end of the day, if there is real conviction in what the Government are saying, they will be prepared to put their money where their mouth is and provide training in skills that young people need to get out of the Catch 22 situation. Employers might then not have any option but to take on people in real jobs created for the purpose of giving us a prosperous economy.

Mr. Ron Leighton: The idea in this statement is not a new initiative: it is a re-hash of the old and discredited young workers scheme that was recently stopped because it catered for the under-18-olds who are now covered by the two-year YTS. This scheme will pay employers £15 per week for a year—provided they restrict pay to no more than £55 per week if the employee is under 20 and £65 if he is 20. It is a bribe, an inducement, to employers to pay low wages. Its sole purpose is to exert a downward leverage on pay. Together with the exclusion of young people from the orbit of wages councils, it is part of a comprehensive strategy for reducing the incomes and the standard of living of the whole of the young generation from the age of 16 to the age of 21.
Young people leaving school will be expected to go on an under-funded youth training scheme and then to go on to the low-paid new workers scheme until the age of 21. Both these schemes are brought together as a continuous whole. We now have a picture of the Government's intention and policy for youth, covering permanently the expectations of a whole generation.
Let no one delude himself that the new workers scheme will solve youth unemployment. It will produce no new jobs. It will only redistribute exising jobs. I spoke about the young workers scheme, of which this is merely an update, as discredited. It was discredited by expert ananlysis by the Public Accounts Committee and by the Institute of Manpower Studies, which said that 85 per cent. of the take-up of the scheme was "deadweight"—that is to say, that the subsidy was being claimed for jobs that existed anyway. In addition, there is the substitution effect—the subsidy causing cheaper young workers to be

used at the expense of adult workers who would be displaced as a result of this deadweight because it created so few new jobs.
The Public Accounts Committee said that in 1983 the net cost of each person taken off the unemployment register by the YWS was £5,355—by far the highest net cost of any special employment measures because of the negligible employment effect. When the YWS was abolished we thought this had been recognised, but it had not; it was abolished because it clashed with two-year youth training scheme. It has now been revamped to take over after YTS and to continue low-paid employment.
There would be something to be said for an employment subsidy if it were paid for those workers who it could be demonstrated were additional, and, most importantly, if it were not attached to a particular and very low level of wages—in other words, if the subsidy were not part of a concerted policy of reducing the pay of the lowest paid, not part of the misguided nonsense of pricing people into jobs. But that is what it is; this is what we have to consider. The Government are deluded. Their sole policy for tackling unemployment is reducing wages. That is the only idea they have in their head, and it is a fatally flawed one, as all experience shows. This is why they abolished the fair wages resolution which said that workers on Government contracts should have fair wages. It is why they abolished schedule 11 to the Employment Protection Act. It is why they are attacking wages councils and excluding young people from their jurisdiction.
What has been the practical effect of all this? Despite these measures, unemployment has continually increased. It has trebled since the Conservatives came to office. They can think only of more of the same. They believe that the only way to get people off the dole is to move them into sweat shops. Working people are being told that they are the cause of unemployment and that unless they take lower wages, to price themselves into jobs, unemployment will continue to rise.
That is the central plank of Government policy, strategy based on a flawed theory which is causing widespread poverty and hardship, for only the poorer people are having their wages reduced. The latest earnings survey showed that in 1985, the bottom 10 per cent. had pay increases of less than the rate of inflation, while the top 10 per cent. had increases of well above that. It is no accident that the rich are getting richer and the poor poorer. It is happening because of Government policies such as the measure we are debating tonight.
Nor do the Government's polices lead to more jobs. For example, the Contract Cleaning and Maintenance Association said in May 1984 in its submission to the Select Committee about the effect of abolishing the fair wages resolution:
A directive from the Treasury shortly before the recession pointed out that the Resolution would no longer apply to public sector contracts, and provided guidance. In some cases, individual contracts were actually renegotiated (rather than waiting for the existing contract to expire) with two results: (a) an increase in productivity and a reduction in number of cleaning staff employed; and (b) reductions of wages and of other terms and conditions of employment for cleaning staff. These results were the inevitable consequence of the requirement imposed on the cleaning contractors concerned to reduce contract prices. With regard to the renegotiation of contracts, either at the end of the contract or before, the Association believes that there is a very real possibility that the employment of staff at lower rates


of pay than those currently obtaining could, through a parallel reduction in the quality or motivation of staff, lead to a lower standard of service.
Thus, the effect of abolishing the fair wages, resolution has been threefold. The first has been a reduction in wages; the second, a reduction in the numbers employed; and the third, a lower standard of service. What an appalling collection of results.
Has the House noticed what is happening at the driver and vehicle licensing centre, Swansea? A report appeared in The Guardian on March 3—a similar story appeared in The Daily Telegraph—saying:
Women cleaners at the Government's Driver and Vehicle Licensing Centre in Swansea are protesting to their MPs about the new employment deal which will mean more work for less pay. The private contractors who employ them are proposing to reduce the workforce from 130 to 102. The women, who earn £27 a week, will also have to take a pay cut of 30p an hour, lose their holiday money and carry out their nightly work in two and a half hours instead of three. The firm, Exclusive Cleaners of Bristol, is out to save £132,000 on a new contract with the Department of Transport beginning on March 24. The firm has told the women that the employment deal is not for negotiation.
The result of cutting these already pitiful wages is the employment of not more but fewer workers. Nor does it matter by how much wages are cut in our great public services, because the Government are setting out to rein back the numbers employed in the public sector and are limiting local authority expenditure in areas such as construction.
This measure, to reduce young people's pay, has no intellctual credibility. It is based not on evidence but on prejudice, dogma and the ideological spite of the hard Right. I was told in a parliamentary reply on January 16 last that between April 1979 and April 1984, the average gross earnings of males over 21 had increased by 79 per cent., that those of 18 to 20-year-olds had increased by only 63 per cent. and that those of the under-18s had increased by only 57 per cent. In other words, male youth wages fell by 23 per cent. compared with those of male adults, and young women's pay fell by 30 per cent. We have had the equivalent of a laboratory experiment in cutting youth wages. Did it work? Were more employed? We all know the answer. Youth unemployment has actually trebled and gone up disproportionately. So the argument is completely bogus, and there is no reputable basis for this spiteful measure.
In considering whether lower pay is the way to higher employment, we may note that this was not the approach taken recently with the higher-paid civil servants, the judges or the top brass in the armed forces. We may also note that unemployment in Britain is higher where wages are lowest, and vice versa.
The last piece of evidence that I want to consider is the working of the Equal Pay Act in the 1970s. In that decade its aim was to achieve equal pay for the same work over a five-year period. Had it been brought forward now, a decade later, I am sure that the Government would, under their present dogma, have claimed that lifting women's pay would damage their employment prospects. Although the law had loopholes, there was a sharp rise in the relative pay of women; but this did not stop the trend of increasing female participation in the labour force. Women's pay rose faster than men's and so did women's employment, thus denying and disproving the pricing-out theory about jobs.
The phoney pricing-out theory is used by the Government to attack the young and the low-paid, and to excuse and shift the blame from the failures of their

economic policy. The new workers scheme, a low-paid scheme for young workers, is not the route to job creation; it merely impedes discussion of how to tackle unemployment. While others are enriched, it is an attempt to put the whole of the younger generation up to the age of 21 in a straitjacket of low pay. This will show young people who their enemies are and mobilise them for a change of Government as soon as possible, and hence a more hopeful future.

Mr. Lang: When we started our debate tonight, I said that it was about jobs for young people. Various points have been made by right hon. and hon. Members on both sides of the House—I shall take them up in a moment—but I remain convinced that this is an issue on which there is no real division, on party or any other lines, about our objectives. We all want to see young people properly equipped for working life, with the right preparation and grounding and with their own particular aspirations and ambitions.
The hon. Member for St. Helens, North (Mr. Evans) referred to the unemployment levels for young people, and asked about some of the figures for the lower age range. He may like to know that in January 1979, when his party was in power, those under 20 represented 17·3 per cent. of total unemployed; in January of this year those under 20 represented 15·5 per cent. In the case of the under-18s—my hon. Friend the Member for Bradford, North (Mr. Lawler) also introduced some interesting figures—where unemployment was more than twice as high as the overall national rate in January 1979, when the last Labour Government was in power, it was down to less than 50 per cent. more by January 1986.
The hon. Gentleman referred to a report by Sussex university which I believe was undertaken in 1982, rather than 1984, and so was done at the very outset of the young workers scheme, when the figures and the impact were very unclear. It said that the net effect on job creation, he tells us, was nil—but, of course, the subsequent research carried out more recently has shown that the figure of new job creation has been steadily rising and is now estimated at about 27 per cent. Some 90,000 new jobs have been created.
I hope that the hon. Gentleman will believe that, if the Government did not think that there was merit in this scheme, we would not be contemplating putting taxpayers' money into a successor scheme, based largely on the outline of the original scheme.
The hon. Gentleman referred to the fact that there was no training, as he claimed, on the young workers scheme. I draw his attention to the fact that 22 per cent. of the members of the young workers scheme were on formal apprenticeships, 50 per cent. had some induction training and 72 per cent. had some informal, on-the-job training. As to gross weekly earnings, and the hon. Gentleman's anxiety about overtime, we have certainly set the earnings for the different age groups at specific levels, but if an employee rose above those limits he would leave the scheme; he would remain in the employment of the employer but the employer would no longer claim the £15 subsidy. Alternatively, instead of giving him increased overtime, the employer could take on another new worker and thus create another job.

Mr. Evans: As many youngsters will be expected by their employers to work overtime, if a youngster works


overtime, let us say, on a Saturday or a Sunday and is given overtime payment, and that takes his payment above the qualifying level, does that mean that the job subsidy will stop? If that is the case, the youngster will be expected to work overtime, and the employer simply will not pay him.

Mr. Lang: The limit of £55 for 18 and 19-year-olds and £65 for 20-year-olds is an upper limit which must include such things as overtime or other additional payments.
The hon. Gentleman referred to the benefit position, but there is no change in the way that benefit sanctions are applied. The possible disqualification period is simply extended from six to 13 weeks. As for young people being forced into the young workers scheme, so far some 435,000 applications have been voluntarily made by the employers, and there has been no problem in finding 435,000 young workers to go on to those schemes.

Mr. Nellist: I am sure that the Minister will appreciate this correction. When he opened the debate, I challenged him on job substitution, on an analysis made by the Department of Employment of the previous young workers scheme, predicting the same result for this scheme. Does he remember that his Department commissioned the Institute of Manpower Studies to analyse the young workers scheme and it showed that 94 per cent. Of the jobs in that scheme already existed and only 6 per cent. were created? His Department's evidence to the Public Accounts Committee on 28 February 1984 showed that 77 per cent. of the jobs on the young workers scheme were old jobs. Finally, research paper No. 42, commissioned by the Department of Employment and written by Mr. Bill Wells, shows on page 70 that for reduction of young workers' wages some 68 per cent. to 86 per cent.—not 8 per cent.—of any jobs created would be substitution. The scheme is elastoplast politics playing with the ages of the unemployed, shifting around the unemployment problem, not creating new jobs for workers.

Mr. Lang: It is a pity that the hon. Gentleman did not remain for the debate to make his speech instead of intervening in my opening speech and then returning to intervene when I reply.

Mr. Nellist: I went to the Library to get the figures.

Mr. Lang: Several other points have been made by other hon. Members about substitution, but at present I am dealing with the point raised by the hon. Member for St. Helens, North. Young people whose wages were forced up by trade unions during the late 1970s in order to demonstrate their muscle, were exploited in the sense that, when reality set in and the demand for their labour began to decline, it was the young workers who were the first to lose their jobs because they were over-priced in the market.
My hon. Friend the Member for Bradford, North made a number of sensible points. He was right to emphasise the commonsense aspect of having a scheme which allows young workers to move into the world of employment at an appropriate wage rate, related to their experience and ability to deliver. I was interested in his proposal about a three-year training scheme and I can assure him that we shall be monitoring the new scheme carefully.
The hon. Member for Newham, North-East (Mr. Leighton) complained about the net cost to the Exchequer, and quoted a figure of £5,553. That figure is completely out of date. The figures published in the public expenditure White Paper show a net cost to the Exchequer in 1984–85 of £2,400 and in 1985–86 of £1,400 for the young workers scheme per person removed from unemployment and in a job. That figure takes account of the deadweight and the substitution to which hon. Members have referred and which they have exaggerated. Those figures compare interestingly with the £7,000 net cost to the Exchequer mentioned in the Select Committee's recent subsidy scheme.
As for our estimate for the new workers scheme, that would be even lower than the £1,400 and might be in the range of £1,300. The generation of new jobs by the young workers scheme has been increasingly successful. Perhaps the Opposition cannot believe the growing success of our schemes because their schemes in the 1970s—the youth and adult employment subsidies—had such poor results.
The hon. Member for Portsmouth, South (Mr. Hancock) referred to the 27 per cent. new jobs created and seemed completely to dismiss them, although they amount to some 90,000 new jobs. He referred to the 63 per cent. or 64 per cent. deadweight like a pessimist who prefers to say that a whisky bottle is half-empty when an optimist would say it was half-full. I am bound to say that I find his whole approach profoundly depressing. As for the reference to displacement being overwhelming, I made no such reference. The displacement or substitution is around 10 per cent. As I pointed out to the hon. Member for Coventry, South-East (Mr. Nellist) the adult substitution is around 8 per cent., not the 80 per cent. figure that the hon. Gentleman tried to suggest to the House.
The rest of the speech of the hon. Member for Portsmouth, South was a mixture of woolly emotional nonsense, completely lacking in any constructive policy proposals, entirely out of touch with the trend of young unemployment, which is now down, and addressing itself to no specific details of our policies. It might have been more interesting for the House if he had offered one constructive policy of his own.
It is important to realise that we are introducing the new workers scheme into a situation in which, while we are deeply concerned about the scale of youth unemployment, nevertheless there are positive signs of progress. Taking the three years to January of this year, unemployment has fallen by 35,000—16 per cent.—among under 18-year-olds, by 28,000–7·5 per cent.—among 18 and 19-year-olds and by 63,000–11 per cent.—for all those under 20. Three years ago, those under 20 represented over 18 per cent. of the total unemployed. Now, that figure is around 15·5 per cent. of the total.
The position for young people, therefore, has improved in absolute numbers and vis-à-vis other groups. There are a number of reasons. Of course, the introduction of YTS has had an effect. So have demographic changes, as well as the general level of demand, which reflects the success of our wider employment and enterprise policies, generating 1 million extra jobs in the same period.

Mr. Evans: Will the Minister concede that there are still 1 million fewer in employment now than there were in 1979 when the Tory Government took office?

Mr. Lang: The hon. Gentleman should look at the figures. Of course jobs were lost in 1980 and 1981 in large


numbers when we picked up the tab for five years of Socialism and inherited an economy in which industrial relations were in chaos, inflation was rife, overmanning was rampant and jobs were waiting to be blown away at the first gust of the recessionary wind. Since 1981, we have been able to pick up the pieces and gradually generate new jobs. Year by year, we have had success in creating new jobs in increasingly large numbers. We now see not only over 1 million new jobs created since 1983 but youth unemployment, according to the figures that I have just given, steadily falling.
We have also seen, particularly since 1982—

Mr. Nellist: Will the Minister accept that, of the new jobs that the Government claim to have created, some 574,000 are women's jobs? According to a written answer by his Department this week, 99 per cent. of those 574,000 new women's jobs are part-time jobs of less, or far less, than 30 hours. If one were to count the number of new jobs on a full-time equivalent basis, the 1 million figure would be seen for the chimera that it is.

Mr. Lang: I am not sure what is wrong with women's jobs. Many women have decided to return to the labour market. That, in addition to the increasing number of school leavers coming into the jobs market as against pensioners retiring from it, has meant that we have had to move still faster to stand still. I do not see what is wrong with part-time jobs. Over 500,000 part-time women's jobs have been created in the last few years. These are jobs that people want—employers and women want them—jobs that create extra flexibility in the economy. I do not see any justification for the hon. Gentleman describing them in so derogatory away.
What we have also seen, particularly since 1982, is some movement towards a widening of the dangerously narrow gap between the pay rates of young people and adults. I am careful not to ascribe the happy effects of falling youth unemployment solely to this decline in relative pay. There are, as I have said, other factors, but the turning of the tide on young people's pay relativities has not come a moment too soon.
Less than 20 years ago, a school leaver joining a factory at 15, would expect to take up to six years to reach the adult rate, at 21. Since then, that six-year period has been compressed, in many cases, into a two-year period between 16 years of age and 18, with serious consequences for youth unemployment levels. We have had to work hard to try to get the message across that pay rates for young people that are too high are a handicap to them in convincing employers to take them on rather than other groups of workers.

Mrs. Elaine Kellett-Bowman: Does my hon. Friend agree that the German system of not paying school leavers any more when they leave at 16 than a young worker starting on a training period is a good one?

Mr. Lang: My hon. Friend makes an extremely sensible point. The German approach is realistic and sensible and may to some extent, account for the strength of the German economy.
We still have a long way to go. For example, engineering wage relativities are generally about 20 percentage points higher now than they were 20 years ago. The importance of the new workers scheme is that, like the YWS which it succeeds, it encourages employers and

young people to be sensible about young people's pay, to offer jobs to more of them rather than unrealistically high wages to just a few. The young workers scheme was successful and had some effect. Relative pay rates for young people have declined since 1982. We also believe that the new workers scheme is the sort of help wanted by employers, many of them small businesses.

Mr. Lawler: Does my hon. Friend accept that, of the 1 million or so jobs created over the past three years, some 450,000 have gone to self-employment? Does that not offer great hope for future employment growth?

Mr. Lang: My hon. Friend is right, and I am glad that he recognises, as do all my right hon. and hon. Friends, the great importance of self-employment—that it has created new jobs. We now have the highest proportion of self-employed in the economy since 1921, and that bodes well for the future. It is also of interest that the vast majority of jobs on the young workers scheme went to small firms; that will be reflected in the development of the scheme.
Of course, the scheme will direct some jobs towards young people rather than older workers. That is our aim in singling out this age group for special help. It is, like the Government's other employment measures, carefully designed and cost-effective. It also fits into our broader strategies. It complements the two-year YTS, the national insurance changes and the wages council proposals. Young people know that our measures work— over 1 million through YTS—and a quarter of enterprise allowance businesses are run by under-25s. That bodes well for the continuing development of enterprise.
If only the number of new company starts under the 1974–79 Labour Government had equalled the level of company starts now, we would be facing a far more encouraging prospect for jobs. Over 435,000 jobs have been supported by the young workers scheme. The new workers scheme, too, offers practical help, where it is needed, for young people entering the labour market, and their employers. I commend the motion to the House.

Mr. Dave Nellist: This measure is the latest example of class politics. It has nowt to do with creating jobs for young or old workers, but everything to do with the Government's essential philosophy of driving down workers' wages to allow the employers more profit. Every shred of evidence that has been examined, whether from the Midland Bank review, the Institute of Manpower Studies or the Department of Employment's research, shows that reductions in young workers' wages have not solved the problem of youth unemployment.
This measure carries all the hallmarks of the anti-youth, anti-working class measure that the YTS was. The real reason for the scheme should be written into the Official Report. It is designed to create a generation of youth on a conveyor belt. It is coming out of school used to £27 quid a week on the YTS. These workers would be on £44 a week if that allowance had risen with the general level of earnings since the scheme's inception in 1978. There has been a £17 a week cut in the training allowance given to young people. The general level of school leavers' wages has fallen by 12 per cent. for boys and 13 per cent. for girls since 1979, yet youth unemployment has trebled.
As Nye Bevan used to say in this place, "Why look in the crystal ball when you can read the book?" The Government's record shows that all they are interested in doing is driving down the wages of young people. Job creation will happen at the expense of older workers.
This is a cheap and nasty measure that ought to be thrown out by the House.

Question put:—

The House divided:—Ayes, 170, Noes 111.

Division No. 162]
11.45 pm


AYES


Alexander, Richard
Griffiths, Peter (Portsm'th N)


Amess, David
Ground, Patrick


Ancram, Michael
Gummer, Rt Hon John S


Ashby, David
Hamilton, Hon A. (Epsom)


Atkins, Robert (South Ribble)
Hamilton, Neil (Tatton)


Atkinson, David (B'm'th E)
Hanley, Jeremy


Baker, Nicholas (Dorset N)
Hargreaves, Kenneth


Baldry, Tony
Harris, David


Batiste, Spencer
Harvey, Robert


Bellingham, Henry
Haselhurst, Alan


Best, Keith
Hawksley, Warren


Bevan, David Gilroy
Hayward, Robert


Biffen, Rt Hon John
Hickmet, Richard


Blaker, Rt Hon Sir Peter
Higgins, Rt Hon Terence L.


Boscawen, Hon Robert
Hind, Kenneth


Bottomley, Peter
Hirst, Michael


Bowden, A. (Brighton K'to'n)
Hogg, Hon Douglas (Gr'th'm)


Bowden, Gerald (Dulwich)
Holland, Sir Philip (Gedling)


Boyson, Dr Rhodes
Howard, Michael


Brandon-Bravo, Martin
Howarth, Gerald (Cannock)


Bright, Graham
Hunt, David (Wirral W)


Brinton, Tim
Hunter, Andrew


Brooke, Hon Peter
Johnson Smith, Sir Geoffrey


Brown, M. (Brigg &amp; Cl'thpes)
Jones, Gwilym (Cardiff N)


Bruinvels, Peter
Jones, Robert (Herts W)


Buck, Sir Antony
Kellett-Bowman, Mrs Elaine


Burt, Alistair
Kershaw, Sir Anthony


Butcher, John
Key, Robert


Butterfill, John
King, Roger (B'ham N'field)


Carlisle, John (Luton N)
Knight, Greg (Derby N)


Carlisle, Rt Hon M. (W'ton S)
Knowles, Michael


Carttiss, Michael
Lang, Ian


Cash, William
Latham, Michael


Chapman, Sydney
Lawler, Geoffrey


Chope, Christopher
Lawrence, Ivan


Clark, Dr Michael (Rochford)
Lennox-Boyd, Hon Mark


Colvin, Michael
Lester, Jim


Coombs, Simon
Lewis, Sir Kenneth (Stamf'd)


Cope, John
Lightbown, David


Cormack, Patrick
Lilley, Peter


Dorrell, Stephen
Luce, Rt Hon Richard


Dover, Den
Lyell, Nicholas


Dunn, Robert
McCurley, Mrs Anna


Eggar, Tim
MacGregor, Rt Hon John


Emery, Sir Peter
MacKay, Andrew (Berkshire)


Evennett, David
MacKay, John (Argyll &amp; Bute)


Eyre, Sir Reginald
Maclean, David John


Fairbairn, Nicholas
McNair-Wilson, M. (N'bury)


Fallon, Michael
Madel, David


Farr, Sir John
Major, John


Fenner, Mrs Peggy
Malins, Humfrey


Forsyth, Michael (Stirling)
Malone, Gerald


Forth, Eric
Marlow, Antony


Franks, Cecil
Mather, Carol


Fraser, Peter (Angus East)
Maude, Hon Francis


Freeman, Roger
Mawhinney, Dr Brian


Fry, Peter
Mayhew, Sir Patrick


Gardner, Sir Edward (Fylde)
Merchant, Piers


Garel-Jones, Tristan
Meyer, Sir Anthony


Goodhart, Sir Philip
Miller, Hal (B'grove)


Goodlad, Alastair
Mills, Iain (Meriden)


Gow, Ian
Miscampbell, Norman


Gower, Sir Raymond
Mitchell, David (Hants NW)


Gregory, Conal
Moate, Roger





Montgomery, Sir Fergus
Shepherd, Richard (Aldridge)


Moynihan, Hon C.
Shersby, Michael


Nelson, Anthony
Sims, Roger


Neubert, Michael
Skeet, Sir Trevor


Newton, Tony
Stern, Michael


Norris, Steven
Stewart, Andrew (Sherwood)


Oppenheim, Phillip
Thomas, Rt Hon Peter


Osborn, Sir John
Thompson, Donald (Calder V)


Ottaway, Richard
Thompson, Patrick (N'ich N)


Page, Richard (Herts SW)
Thurnham, Peter


Patten, Christopher (Bath)
Trippier, David


Pawsey, James
Viggers, Peter


Portillo, Michael
Wakeham, Rt Hon John


Powley, John
Walker, Bill (T'side N)


Proctor, K. Harvey
Wardle, C. (Bexhill)


Raffan, Keith
Watson, John


Rathbone, Tim
Wheeler, John


Rhys Williams, Sir Brandon
Wood, Timothy


Ridsdale, Sir Julian
Younger, Rt Hon George


Roe, Mrs Marion



Sainsbury, Hon Timothy
Tellers for the Ayes:


St. John-Stevas, Rt Hon N.
Mr. Tony Durant and


Shepherd, Colin (Hereford)
Mr. Peter Lloyd




NOES


Adams, Allen (Paisley N)
Hogg, N. (C'nauld &amp; Kilsyth)


Alton, David
Hoyle, Douglas


Anderson, Donald
Hughes, Robert (Aberdeen N)


Archer, Rt Hon Peter
Hughes, Roy (Newport East)


Banks, Tony (Newham NW)
Hughes, Sean (Knowsley S)


Barnett, Guy
Hughes, Simon (Southwark)


Beckett, Mrs Margaret
Jones, Barry (Alyn &amp; Deeside)


Bell, Stuart
Kennedy, Charles


Benn, Rt Hon Tony
Kirkwood, Archy


Bennett, A. (Dent'n &amp; Red'sh)
Lamond, James


Bermingham, Gerald
Leighton, Ronald


Bidwell, Sydney
Lewis, Terence (Worsley)


Blair, Anthony
Livsey, Richard


Boyes, Roland
Lloyd, Tony (Stretford)


Bray, Dr Jeremy
Lofthouse, Geoffrey


Brown, Gordon (D'f'mline E)
McDonald, Dr Oonagh


Brown, N. (N'c'tle-u-Tyne E)
McKay, Allen (Penistone)


Caborn, Richard
MacKenzie, Rt Hon Gregor


Callaghan, Jim (Heyw'd &amp; M)
McWilliam, John


Campbell-Savours, Dale
Madden, Max


Clark, Dr David (S Shields)
Marek, Dr John


Clarke, Thomas
Marshall, David (Shettleston)


Clay, Robert
Maxton, John


Clelland, David Gordon
Michie, William


Clwyd, Mrs Ann
Millan, Rt Hon Bruce


Cocks, Rt Hon M. (Bristol S)
Nellist, David


Conlan, Bernard
Oakes, Rt Hon Gordon


Cook, Frank (Stockton North)
O'Neill, Martin


Cook, Robin F. (Livingston)
Park, George


Corbyn, Jeremy
Parris, Matthew


Cunningham, Dr John
Pendry, Tom


Dalyell, Tam
Penhaligon, David


Davies, Ronald (Caerphilly)
Pike, Peter


Davis, Terry (B'ham, H'ge H'l)
Powell, Raymond (Ogmore)


Deakins, Eric
Prescott, John


Dubs, Alfred
Randall, Stuart


Duffy, A. E. P.
Raynsford, Nick


Dunwoody, Hon Mrs G.
Redmond, Martin


Eadie, Alex
Robertson, George


Evans, John (St. Helens N)
Sheerman, Barry


Ewing, Harry
Shore, Rt Hon Peter


Fields, T. (L'pool Broad Gn)
Silkin, Rt Hon J.


Fisher, Mark
Skinner, Dennis


Foot, Rt Hon Michael
Smith, C. (Isl'ton S &amp; F'bury)


Foster, Derek
Smith, Rt Hon J. (M'ds E)


Foulkes, George
Spearing, Nigel


Garrett, W. E.
Stott, Roger


George, Bruce
Thomas, Dr R. (Carmarthen)


Godman, Dr Norman
Thompson, J. (Wansbeck)


Golding, John
Wallace, James


Hamilton, James (M'well N)
Wardell, Gareth (Gower)


Hancock, Michael
Wareing, Robert


Harman, Ms Harriet
Wigley, Dafydd


Hart, Rt Hon Dame Judith
Williams, Rt Hon A.


Haynes, Frank
Winnick, David






Young, David (Bolton SE)
Mr. Don Dixon and



Mr. Lawrence Cunliffe.


Tellers for the Noes:

Question accordingly agreed to.

Resolved,
That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme, the cost of which is expected to exceed £10 million for the year ending 31st March 1987, for making payments to employers to enable them to take on as new employees young people with earnings below the limits specified in the statement laid before the House on 22nd April 1986.

Redundant Miners (Coal Allowances)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maude.]

Mr. Phillip Oppenheim: This debate is about the forgotten miners. These men were mostly made redundant during the large scale pit closures of the 1960s. Despite the fact that many of these men had worked down the mines from the age of 14, despite the fact that they worked under far worse conditions than pertain in the industry today and despite the fact that they received only a pittance in redundancy pay, these men, who were made redundant by the Wilson Government in the 1960s, did not qualify for concessionary coal if they were under 60 when they were made redundant. That was in spite of the fact that most of these men contributed to coal pools to make provision for retired miners under the old system.
These men missed out in a great many ways. They missed out when in 1973 the Heath Government reduced the qualifying age for concessionary coal to 55 but backdated that only to 1969. They also missed out when, under this Government, the age was reduced to 50 in 1983 with no back-dating. Above all, they missed out when, in the 1960s, they were so ungratefully taken for granted by politicians who for too long had taken their votes for granted.
I would not claim that all of the benefits for the mining industry have stemmed from Conservative Governments, but many, if not most, have, especially when it comes to concessionary coal. We have a proud record, which is all the more reason to go a little further and complete the picture. The Coal Board figures show that the cost of extending the concessionary coal benefit to the forgotten miners would be about £3 million. That is a tiny fraction of the total cost of concessionary coal and is just over one tenth of 1 per cent. of the total taxpayers' subsidy, both direct and indirect, to the coal industry.
I accept that this matter greatly affects my constituency. In fact, about 10,000 men were made redundant as a result of the wide-scale pit closures in the area during the 1960s. That figure represents almost half of the total proposed redundancies which in 1983 and 1984 caused the miners' strike. However, in the 1960s, when a Labour Government were in power, it did not cause a cheep. In addition to being a matter of concern to my constituency, it is also a matter of great concern to many other right hon. and hon. Members, as witnessed by the fact that nearly 100 Members of Parliament signed early-day motions on the subject.
I do not necessarily expect my hon. Friend the Member for Wirral, West (Mr. Hunt), the Parliamentary Under-Secretary of State for Energy, to give an affirmative answer tonight, but I ask him to go away and consider, with his colleagues, the fact that the case and the cause of these forgotten miners is just. The cost is not great, but the injustice most certainly is great. I hope that he will consult his colleagues and do his utmost to ensure that these forgotten miners are not forgotten for very much longer.
I am pleased to see that the hon. Member for Bolsover (Mr. Skinner) is now in the Chamber. I am sure that he will be straining at the leash to make a contribution to this debate. I am aware that other hon. Members have raised this matter on previous occasions. I welcome very much


their support, including that of the hon. Member for Bolsover, for this campaign. However, I have to put the hon. Member straight on a few points.
During our debate in March on concessionary coal the hon. Member for Bolsover tried to make out that he had been tirelessly pushing this cause for years, but he was well wide of the mark. During that debate the hon. Member claimed to have raised the matter during previous debates on concessionary coal. I remember that the hon. Member refused to accept interventions during his speech in that debate. I understand why very well. I checked his contribution to the 1985 debate and found that although during his speech, which lasted for more than 30 minutes, he waxed very lyrical upon a number of subjects, including the miners' strike and that although, with his well-known charm, he scattered insults at several Conservative Members who attended that debate, so great were his oratorical efforts that he did not manage to say one word in support of the forgotten miners.
Despite the hon. Member's record of having raised the matter during the early days of this Government, he seemed oddly unwilling to push the case in Parliament during the period in office of the last Labour Government, when one might have thought that he might have exerted some influence. But perhaps I underestimate the Treasury Bench of that time.
I know that the hon. Member likes to think of himself as a relentless pursuer of truth, as a true parliamentarian and as the man who speaks for Joe Average. Considering, therefore, his much-vaunted fearlessness, I find it astonishing that he should not have given way once during the last debate on concessionary coal, so that his misapprehensions might be put right. None the less, I am sure that he now welcomes the fact that the record is being put straight. It would be churlish of me not to accept the hon. Member for Bolsover's support of those Conservative Members who are fighting this cause. If he can do his utmost to couch that support in sensible and sane terms, it will be valuable and welcome.

Mr. Dennis Skinner: I am pleased to be able to take part in the debate and put the record straight. It is well known by the Parliamentary Under-Secretary of State for Energy and by my hon. Friend the Member for Leigh (Mr. Cunliffe) that I and many other Opposition Members have raised this matter on many previous occasions. I have checked the record.
On 22 March 1983 there was a debate similar to that which was held in March 1986. The Financial Secretary to the Treasury was then the Parliamentary Under-Secretary of State for Energy. At column 820 of that debate I made another intervention. It was the fifth or the sixth on the subject since I have been a Member of Parliament. I called upon the then Under-Secretary of State for Energy to take into account the deprived miners and their widows in the southern end of my constituency, and others in Lancashire, who are unable to get coal. It will be seen that at that time the then Parliamentary Under-Secretary of State for Energy said that he would take the matter on board. He referred to the matter twice in reply, and said that although he could not guarantee anything, he would look at it.
As for not raising the matter when my right hon. and hon. Friends were in office, I can assure the hon. Gentleman that it did not matter to me which Government were in power. Quite frankly, I think that those few thousand people have had a raw deal from both Governments. When the redundancy payments and concessionary coal legislation was passed in the House of Commons, it should have been back dated to include those pre-1968 cases. It is scandalous that those people have been deprived of coal. Many of those miners worked in the industry for more than 40 years, and some are survived by widows.
I am pleased to be able to put the matter on the record for the umpteenth time. I ask the Minister to look at it further. That is the reason why I have written. During the past few weeks I have written—

Mr. David Ashby: rose—

Mr. Skinner: I am not allowed to give way in such a debate. I am sorry, but those are the rules. I wrote to the Secretary of State for Energy some weeks ago. The reply I received was unhelpful to the constituents concerned. Therefore, I wrote to the Prime Minister recently, asking her to reconsider the views of the right hon. Gentleman so that she might intervene and the people concerned could receive the coal that they richly deserve. I have put the matter straight. Hansard is a document that anyone can read. What I have said is absolutely correct. If hon. Gentlemen wish to read the Hansard record of the position of previous Governments, they will find many references made by myself, by my hon. Friends and members of the mining group. It is high time that the Minister did something on behalf of the miners concerned and provided them with five loads of coal a year. That has been provided to many people who have not worked in the industry for 40 years. These miners are unable to receive that concession.
I am told that the cost of providing this necessary benefit to those who have given their all to the industry will be about £3 million per annum.

The Parliamentary Under-Secretary of State for Energy (Mr. David Hunt): My hon. Friend the Member for Amber Valley (Mr. Oppenheim) is to be congratulated on securing this important opportunity to raise an issue which, as he has reminded us, is of great concern to many of his constituents and to many former miners. I believe that my hon. Friend has already lobbied extensively on their behalf and has established an excellent reputation as a good constituency Member of Parliament. He made a strong and clearly heartfelt plea in support of ex-miners in his constituency. I recognise the strength of feeling on this issue in many mining communities. My hon. Friends the Members for Leicestershire, North-West (Mr. Ashby), for Elmet (Mr. Batiste), for Sherwood (Mr. Stewart), for Nottingham, North (Mr. Ottaway) and for Warwickshire, North (Mr. Maude) are present in the Chamber, along with the hon. Members for Leigh (Mr. Cunliffe) and for Bolsover (Mr. Skinner). I fully understand the disappointment that is felt by those who contributed to coal pools when they were working but who, under the rules of the schemes to which they contributed, have no entitlement to concessionary coal following redundancy.
I have listened carefully to the points raised, but I would not be honest if I did not make it clear that I cannot see any possibility, after all these years, of introducing new measures to benefit this small group. I know that the hon. Member for Bolsover said that those people have had a raw deal. He put forward some compelling arguments. I think that he was the first hon. Member, during this short debate, to point out that the cost of providing the coal is £3 million. One of the reasons why it is not possible to benefit this small group is the cost involved. My hon. Friend the Member for Amber Valley cited the figure of £3 million. The cost of covering this situation could be expected to amount to many millions of pounds over the years.
Equally important is the impossibility of achieving the end desired by my hon. Friend without creating new difficulties. Just as concessionary coal to serving workers is part of their remuneration, concessionary coal to redundant mineworkers is part of their redundancy package. Redundancy terms for mineworkers, including the provision of concessionary coal, have been improved on numerous occasions over the years and there is no possibility of retrospectively awarding to those who left in earlier years the generous terms now available. Any attempt now to apply to those who left under one set of terms part of a system of benefits introduced later would produce grievances at least as strong as those which it was intended to satisfy.
Hon. Members will know the history of concessionary coal. It is one of progressive improvement. The practice of supplying free or cheap coal to mineworkers finds its derivation in the necessity for domestic heating of water for daily baths. Because of the absence of pithead baths, those baths had to be taken at home. As time went by, concessionary coal came to be looked upon by the men and, to some extent, by the coal owners as part of wages. As a result, although the need for bathing at home was progressively eliminated with the general provision of pithead baths, the concession continued, although in some cases at a reduced rate.
Concessions on coal became one of the matters to be negotiated as part of the wage bargaining system. The concessions came to benefit not only serving workers but retired workers, widows and sick and injured workers. The coal became, and still is, much prized amongst all those groups.
Since nationalisation, the National Coal Board has done a great deal to negotiate new agreements designed to remove anomalies and standardise entitlements. Initially, this involved the negotiation of agreements covering whole wages districts. Where these extended the supply of coal to categories of beneficiaries not previously entitled, this was done at the expense of serving workers, who accepted a reduction in their entitlement or agreed to contribute a proportion of them to a pool to be used for the benefit of retired, sick or injured men and widows. These still complex arrangements were further complicated by the advent of clean air legislation and the need to make special arrangements for concessionaires living in smokeless zones. In 1961, a national agreement was negotiated with the unions providing for the supply of smokeless fuel in these zones on standard terms and conditions.
In 1962 the NCB agreed that redundant men over 60 at the date of redundancy should be treated as retired men for concessionary coal purposes. However, where coal was

provided under pooling schemes it was left to the local committee of management to agree to an increased level of contributions for serving workers to provide coal for the redundant men. Not all committees of management agreed, and in the 1960s there were still many anomalies in the supply of concessionary coal.
The rundown in numbers of serving workers in the industry, as my hon. Friend the Member for Amber Valley pointed out, had a significant impact on the relative proportions of serving workers to beneficiaries, and hence on coal pooling schemes. To keep the schemes in balance, each serving worker's contribution to the pool needed to be increased, or each beneficiary's entitlement reduced, or both. In practice, that did not happen to a significant extent and the pools ran up substantial deficits and ceased to be viable. In the Coal Industry Act 1965 powers were given to the Government to reimburse to the NCB part of the costs of maintaining arrangements for benefits in kind in areas where the number of persons employed by the board had fallen since the end of March 1965 as a consequence of the closure of collieries. This power has been kept in being through later legislation, and presently derives from section 6 of the Coal Industry Act 1977. Last year, using that power to make substantial contributions to help the board finance the maintenance of concessionary coal arrangements, the Government contributed £18 million.
Following the introduction of the first redundant mineworkers payments scheme in 1968, which provided benefits for men aged 55 or over on redundancy who otherwise satisfied the requirements of the scheme, there was pressure to enhance the terms available to enable such men to receive concessionary coal as though they had reached normal retirement age. The Government responded to this pressure in the Coal Industry Act 1973, amending the power to make schemes benefiting redundant mineworkers in the 1967 Act. In that same year the first concessionary coal payments scheme was introduced by order. This provided for reimbursement to the National Coal Board of the full cost of concessionary coal to men aged 55 to 59 who qualified for benefits under the redundant mineworkers payments scheme from 14 December 1969, and half the cost of providing concessionary coal to such men age 60 to 65.
Benefits under the redundant mineworkers payments scheme were successively improved over the years, and in 1983 weekly benefits under the scheme were introduced for those aged 50 to 54 on redundancy. The concessionary coal payments scheme was extended to cover this group at the same time. Last year the Government paid the National Coal Board under the concessionary coal payments scheme £13 million in addition to the £18 million I mentioned earlier.
Throughout this period negotiations between the board and the NUM on the provision of concessionary coal continued, and in October 1983 the present national concessionary fuels agreement finally came into operation. This provides for uniform direct entitlement of retired miners and widows to coal. It generally increased coal allowances, but restricted the availability of cash in lieu save in cases of genuine medical difficulty.
I hope that hon. Members who are familiar with the history of concessionary coal will forgive me for having briefly outlined some of its more important features.

Mr. Skinner: rose—

Mr. Hunt: After I have dealt with the intervention of the hon. Member for Bolsover, there are two aspects to which I wish to draw attention.

Mr. Skinner: The thing which rankles with the people who are not receiving coal—I do not think the Minister has touched upon it—is that all those who do not receive coal but who ought to made a contribution to the local pool schemes, some for 40 years. In Derbyshire the people used to contribute 30 cwt. of their total annual entitlement. This is like someone paying into an unemployment scheme or a social security scheme for 40 years and not getting his entitlement at the end. That is the injustice, and that is why they believe that they have a case.
The previous Tory Government introduced a scheme to give retirement pensions to those aged 80 years, even though some of those people had not contributed. That was a sensible thing to do. It is not as though the Government are being asked to do something which previous Tory Governments have not done in other areas.

Mr. Hunt: The hon. Member will surely recollect that I dealt with that point in my opening sentences. I said that I fully understood the disappointment which is felt by those who contributed to coal pools when they were working but who, under the rules of the schemes to which they contributed, had no entitlement to concessionary coal following redundancy. That was the rule of the scheme to which they contributed and it made no provision for them to have that benefit.
The two other aspects to which I wish to draw attention are, first, the progress which has been made over the years in improving the arrangements under which concessionary coal is provided to beneficiaries and those who have left the industry on redundancy; and, secondly, the extent to which this Government have contributed financially to make this possible.
It is against this background that I must say that any change now will create anomalies and injustices at least as severe as any it might remove. For example, if it were decided that henceforth the Government should meet the cost of providing concessionary coal to anyone who qualified under the first redundant mineworkers payments scheme but was made redundant before the effective date of the concessionary coal payments scheme in December 1969, this would merely add to the grievance of those whose redundancy fell before 17 July 1967, and who, therefore, never had the advantage of benefits under the redundant mineworkers payments scheme in the first place. If, however, the relevant date is taken back to

before 17 July 1967, the men cannot meet the requirement under concessionary coal payments scheme legislation to have satisfied the conditions for receipt of redundant mineworkers payments scheme benefits, and it is now impossible to know who, but for the fact that the RMPS had not been introduced, would have satisfied equivalent conditions. So this requirement would have to be waived. But that would inevitably create a sense of grievance among those who became redundant later, but who failed to satisfy the conditions which have subsequently been removed for men who left earlier.
Furthermore, what about those who would be covered by any new concession but for the fact that they have no ability to use concessionary coal? I am thinking of those who have perhaps moved into houses where they do not have the ability to burn coal, or who, since we are now talking about quite elderly people, might have gone into homes or warden-assisted accommodation. Are we to give them cash in lieu, even where under the terms of the present national concessionary fuel agreement they would not be entitled to it? If we are to give cash in lieu, we are no longer talking about the provision of concessionary coal; we are talking about a further state cash benefit to some of those who received redundancy benefits from the coal industry in the 1960s. Alternatively, are we to let such people sell their concessionary coal, even where this would lead to loss of entitlement to anyone receiving coal under the present national concessionary fuel agreement?
My hon. Friend has made a compelling case. I appreciate the regard in which concessionary coal is held in mining areas, and can understand the disappointment of those who contributed to coal pools when they were working, left the industry on redundancy in the 1960s, but under the rules of the schemes to which they contributed have no entitlement to concessionary coal. But there is no magic wand which can be waved to satisfy this group without creating anomalies and injustices at least as acute as those which it was designed to cure. Nor can the money for a further concession by conjured up from nowhere.
The history of the provision of concessionary coal to redundant miners, retired miners, sick and injured miners and widows is one of progress. Successive Governments have provided generous financial support to help make that progress possible, but I can hold out no prospect of the further concession which in tonight's debate my hon. Friend has so ably argued should be made.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past twelve o'clock.